Crying over Spilled Milk: The Arnott-Stiglitz Moral Hazard Model

7 Pages Posted: 27 Dec 2014 Last revised: 22 Jan 2016

See all articles by Hak Choi

Hak Choi

Chienkuo Technology University - Department of International Business; Chung-Hua Institution for Economic Research

Date Written: December 26, 2014

Abstract

This paper points out two fundamental mistakes committed by Arnott and Stiglitz: their formulation of expected utility is a single point, and their introduction of the effort parameter is detrimental. The first mistake destroys their hope to retrieve an indifference curve. The second mistake makes their model look ugly. This paper also proves that their fabricated conclusion can be easily overturned.

Keywords: Insurance, Moral Hazard

JEL Classification: G22

Suggested Citation

Choi, Hak, Crying over Spilled Milk: The Arnott-Stiglitz Moral Hazard Model (December 26, 2014). Available at SSRN: https://ssrn.com/abstract=2541206 or http://dx.doi.org/10.2139/ssrn.2541206

Hak Choi (Contact Author)

Chienkuo Technology University - Department of International Business ( email )

No.1, Chiehsou N. Road
Changhua City, 500
Taiwan
+886 91 901-4618 (Phone)

HOME PAGE: http://euntold.wordpress.com

Chung-Hua Institution for Economic Research ( email )

75, Changhsin St.
Taipei
Taiwan

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
55
Abstract Views
699
Rank
670,186
PlumX Metrics