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Risks 2018, 6(2), 60; https://doi.org/10.3390/risks6020060

Risk Aversion, Loss Aversion, and the Demand for Insurance

1
Department of Economics and Quantitative Methods, IÉSEG School of Management, 3 rue de la Digue, 59000 Lille, France
2
Department of Statistics and Quantitative Methods, University of Milano-Bicocca, Via Bicocca degli Arcimboldi 8, 20126 Milano, Italy
*
Author to whom correspondence should be addressed.
Received: 27 March 2018 / Revised: 18 May 2018 / Accepted: 22 May 2018 / Published: 25 May 2018
(This article belongs to the Special Issue New Perspectives in Actuarial Risk Management)
Full-Text   |   PDF [930 KB, uploaded 25 May 2018]

Abstract

In this paper we analyze insurance demand when the utility function depends both upon final wealth and the level of losses or gains relative to a reference point. Besides some comparative statics results, we discuss the links with first-order risk aversion, with the Omega measure, and with a tendency to over-insure modest risks that has been been extensively documented in real insurance markets. View Full-Text
Keywords: first-order risk aversion; stochastic dominance; insurance; expected utility first-order risk aversion; stochastic dominance; insurance; expected utility
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).
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Eeckhoudt, L.; Fiori, A.M.; Rosazza Gianin, E. Risk Aversion, Loss Aversion, and the Demand for Insurance. Risks 2018, 6, 60.

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