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NTU Management Review Vol. 36 No. 1 Apr. 2026

when the worst loss distribution is unaffected but the best loss distribution below the initial
optimal deductible deteriorates in the sense of first-order stochastic dominance (FSD).
The conditions under the nonspecific ambiguity increase are analogous to, yet more than,
those associated with risk changes in the absence of ambiguity, as reported by Powers

and Tzeng (2001). On the other hand, after a general ambiguity increase, the individual
chooses a lower deductible level when the odds of obtaining partial indemnity relative to
no indemnity increases under the loss distribution distorted by ambiguity aversion.

This paper makes several contributions. First, regarding decision-making under
ambiguity that can be characterized by the α-maxmin model, we believe this is the first
paper that examines the optimality of a straight deductible and studies the comparative
statics of ambiguity on the optimal deductible under ambiguity aversion. Second, our
comparative statics of ambiguity can be viewed as an extension of the work by Birghila et

al. (2023), who study only the optimal insurance contract with a special case of our model
(the maxmin expected utility). In addition, our paper studies a dual problem of the work of
Alary et al. (2013) and Gollier (2014), who study the optimal deductible under ambiguity

aversion versus ambiguity neutrality for certain ambiguity structures with a different
model. Moreover, our determining conditions under the specific and nonspecific ambiguity
increases are preference-free and easily applicable to future empirical studies. Finally, our
results provide insurers with a reference for analyzing the insurance purchasing behavior
of risk- and ambiguity-averse individuals facing ambiguous risks.

The remainder of this paper is organized as follows. Section 2 introduces the model
settings and proves the optimality of deductibles. Section 3 studies the effects of specific
and general ambiguity increases on the optimal deductible. Section 4 concludes the paper.

All the proofs are presented in the appendices.

2. Model Settings and the Optimal Insurance Contract

In this section, we describe the settings and assumptions made for the analysis. Then,

we present our model. Finally, we examine the optimal insurance contract in the presence
of ambiguity.

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