The bilateral information asymmetry on insurance market

This paper restudies the incompletely insuring condition under the influence of adverse selection in insurance market. First of all, this paper demonstrates the bilateral information asymmetry on the insurance market. Following that, through the application of Karush-Kuhn-Tucker Theorem, this paper deduces this condition newly. Finally, this paper draws the conclusion that insurance company should control the compensation amount through the design of insurance contract.