Repeated insurance contracts and moral hazard

Ariel Rubinstein, Menahem E. Yaari

Research output: Contribution to journalArticlepeer-review


An attempt is made to account for the frequently observed phenomenon of insurance companies offering discounts to clients who possess a favorable record of past claims. We argue that such discounts provide a mechanism which enables both insurer and insured to counteract the inefficiency which arises from moral hazard.

Original languageEnglish
Pages (from-to)74-97
Number of pages24
JournalJournal of Economic Theory
Issue number1
StatePublished - Jun 1983
Externally publishedYes

Bibliographical note

Funding Information:
* An earlier version of this paper was presented in April of 1979 at a conference on Economics of Uncertainty in honor of Karl Borch. We are indebted to Robert J. Aumann, Abraham Neyman, Roy Radner, and to an anonymous referee for their comments. Financial support from the U.S.-Israel Binational Science Foundation is gratefully acknowledged.


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