Kiel Working Papers, Kiel Institute for World Economics
No 1613:
Self-Insurance and Self-Protection as Public Goods
Ulrich Schmidt
Abstract: Most pure public goods like lighthouses, dams, or national
defense provide utility mainly by insuring against hazardous events. Our
paper focuses on this insurance character of public goods. As for private
actions against hazardous events, one can distinguish between
self-insurance (SI) and self-protection (SP) also in the context of public
goods. For both cases of SI and SP we analyze efficient public provision
levels as well as provision levels resulting from Nash behavior in a
private provision game. An interesting aspect of considering public goods
as insurance devices is the interaction with market insurance. It turns out
that the availability of market insurance reduces the provision level of
the public good for both, the public and the private provision, regardless
of whether we consider SI or SP. Moreover, we show that Nash behavior has
always a larger impact than the availability of market insurance
Keywords: Self-insurance, self-protection, private provision of public goods, market insurance; (follow links to similar papers)
JEL-Codes: G22,; H41; (follow links to similar papers)
26 pages, March 2010
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