Mahito Okura* and YingYing Jiang
The purpose of this article is to analyze whether a government premium subsidy is desirable by using a game theoretic approach. From our analysis, the following main results are derived. When policyholder’s effort for lowering accident probability is not considered, government conducts premium subsidy when the fraction of policyholders is small. In contrast, when policyholder’s effort is considered, whether government conducts premium subsidy is ambiguous even if the fraction of policyholders is small.
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