| Abstract |
We formally link insurance markets with product markets and identify a demand effect of insurance: if risk-averse consumers can buy insurance against possible product failure, there will be some additional consumers that buy the product because they can also purchase protection. This demand-effect of insurance constitutes an increase in trade that is always to the benefit of both consumers and the supply side of the market, provided that the product price does not change in response to the possibility to purchase protection.
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