Pareto-optimal risk sharing with fixed costs per claim

Contrary to the usual view on the problem, the best way to deal with nuisance claims in insurance policies is not to propose a straight deductible or a franchise; rather, it calls for a contract with a partially disappearing deductible. This is proved by using the same framework as Raviv (1979) but with a costs structure including a fixed cost per claim. This is not covered by previous models.