Robust insurance mechanisms and the shadow prices of information constraints
type: Item
instance of: scholarly article
title: Robust insurance mechanisms and the shadow prices of information constraints
zbMATH Open document ID: 0933.91018
DOI: 10.1155/S1173912699000061
author: Willem K. Klein Haneveld
author: Igor V. Evstigneev
author: Leonard J. Mirman
published in: Journal of Applied Mathematics and Decision Sciences
publication date: 1999-09-22T00:00:00Z
full work available at URL: https://eudml.org/doc/120177
review text: Summary: We consider a risky economic project that may yield either profits or losses, depending on random events. We study an insurance mechanism under which the plan of project implementation maximizing the expected value of profits becomes optimal almost surely. The mechanism is linear in the decision variables, ``actuarially fair'' and robust to changes in the utility function. The premium and the compensation in the insurance scheme are expressed through dual variables associated with information constraints in the problem of maximization of expected profits. These dual variables are interpreted as the shadow prices of information. Along with the general model, several specialized models are considered in which the insurance mechanism and the shadow prices are examined in detail.
Mathematics Subject Classification ID: 91B30
Mathematics Subject Classification ID: 91B06
zbMATH DE Number: 1340879
zbMATH Keywords: decisions
zbMATH Keywords: risk
zbMATH Keywords: value of information
zbMATH Keywords: convex stochastic optimization
zbMATH Keywords: stochastic Lagrange multipliers
zbMATH Keywords: decision-making under uncertainty
zbMATH Keywords: random events
zbMATH Keywords: insurance
MaRDI profile type: Publication
OpenAlex ID: W1971171323
description: scientific article; zbMATH DE number 1340879