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he insured against fire for a daily premium of about
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he insured against fire for a daily premium of about
spreading their own risks over a larger number of smaller firms. Consider Mr A, an entrepreneur running a firm which produces X. 100,000 of his daily output, he would in fact have pooled the risk of fire with the But if there are literally no economies of scale and literally no indivisibilities and if there were literally no costs of management but only costs of facing risks and uncertainties, there would be nothing to prevent Mr A from producing his same output X in 50,000 inde- pendent hazard, if it is wet for Mr A it will also be wet for Messrs B, C, D, E, etc., as well. It is not, therefore, like fire a hazard against which simple insurance will spread the risks. If Messrs A, B, C, D, and E all pay premiums to an insurance company of one third of the value insured against destruction by wet weather tomorrow and if tomorrow is wet, then the insurance company will
Edition 1st Edition
First Published 1968
Imprint Routledge
Pages 1
eBook ISBN 9780203106594