Intertemporal Insurance

Disentangling Insurance and Information in Intertemporal Consumption Choices

The textbook version of the life-cycle permanent income hypothesis with no liquidity constraints predicts that consumption should react very mildly to (unanticipated) transitory income changes and very strongly to permanent ones. This prediction has important policy implications in understanding the response of consumers to tax rebates or increases that are made for stabilization purposes. In r...

Optimal Intertemporal Risk Allocation Applied to Insurance Pricing

We present a general approach to the pricing of products in finance and insurance in the multi-period setting. It is a combination of the utility indifference pricing and optimal intertemporal risk allocation. We give a characterization of the optimal intertemporal risk allocation by a first order condition. Applying this result to the exponential utility function, we obtain an essentially new ...

Disentangling Insurance and Information in Intertemporal Consumption Choices

The textbook version of the life-cycle permanent income hypothesis with no liquidity constraints predicts that consumption should react very little to transitory shocks to income and very strongly to permanent shocks. This prediction has important policy implications, i.e., to understand the response of consumers to tax rebates or increases that are made for stabilization purposes. In recent ye...

Intertemporal Choice

Intertemporal Aggration

Inter-temporal aggregation results in a summarization of information and a natural delay in the release of information. We study a principal-agent model and show that inter-temporal aggregation can be an optimal feature of a performance evaluation system. We also contrast the value of additional information when existing information is inter-temporally aggregated with its value when existing in...