Comments on “ Monitoring and Privacy in Automobile Insurance Markets with Moral Hazard ”

s.t. The model of “Endogenous precision ex ante and privacy costs”

1. The loss of privacy This paper assumes that the loss of privacy (information cost) g(i) is independent both on the level of effort e H and the precision of probability P(i) Since i is defined as the precision of information, it might be reasonable to assume that the precision of probability would be positive related with g(i), that is, P = P(g(i)) Because the more the information cost, the more likely to increase the probability of precision, this might be treated as the another possible incentive scheme for the individuals

s.t. 2. Expected premium

-r H eLoss/No loss i – r H if NoL/s H – r H + d H if L/s H – r L if NoL/s L – r L + d L if L/s L 0 if NoL/s H –A if NoL/s L d H if L/s H d L –A if L/s L A: punishment fee 3. Alternative premium scheme Figure 2