Income Insurance with Uncertain Output.

Abstract

This paper examines the properties of a market solution to the output uncertainty problem faced by unincorporated primary producers. An insurance contract is formulated and shown to provide income insurance to producers without exposing insurers to moral hazard. The equilibrium relative to this contract is shown to be equivalent to that effected by a stock market available to all producers. Copyright 1989 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.