The demand for insurance with an upper limit on coverage.

ABSTRACT

The demand for insurance is examined when the indemnity schedule is make submissive to an upper limit. The optimal contract is shown to display filled insurance above a deductible up to the cap. a certain quantity of results derived in the standard archetype with no upper limit upon coverage turn out to be invalid; the optimal deductible of an actuarially fair policy is positive and insurance may be a normal serviceable under decreasing absolute risk aversion. An increase in the upper limit would induce the policyholder with constant absolute risk aversion to restore his or her optimal deductible and therefore this would increase