×

zbMATH — the first resource for mathematics

Aspects of optimal insurance demand when there are uninsurable risks. (English) Zbl 0651.62099
This paper discusses insurance demand in the presence of uninsurable risks. It is shown that, when these risks are not independent of the insurable risk, expected utility theory can imply counterintuitive results. A solution is provided by applying M. J. Machina’s theory of local utility functions [see Econometrica 50, 277-323 (1982; Zbl 0475.90015) and ibid., 1069-1079 (1982; Zbl 0509.90006)].
Reviewer: E.Shiu

MSC:
62P05 Applications of statistics to actuarial sciences and financial mathematics
91B16 Utility theory
PDF BibTeX Cite
Full Text: DOI
References:
[1] Doherty, N.A.; Schlesinger, H., A note on risk premiums with random initial wealth, Insurance: mathematics and economics, 5, 183-185, (1986)
[2] Kihlstrom, R.; Romer, D.; Williams, S., Risk aversion with random initial wealth, Econometrica, 49, 911-921, (1981) · Zbl 0461.90018
[3] Lippman, S.A.; McCall, J.J., The economics of uncertainty, (), 211-283
[4] Machina, M.J., Expected utility analysis without the independence axiom, Econometrica, 50, 277-323, (1982) · Zbl 0475.90015
[5] Machina, M.J., A stronger characterization of declining risk aversion, Econometrica, 50, 1069-1079, (1982) · Zbl 0509.90006
[6] Mossin, J., Aspects of rational insurance purchasing, Journal of political economy, 76, 553-568, (1968)
[7] Pratt, J.W., Risk aversion in the small and in the large, Econometrica, 32, 122-136, (1964) · Zbl 0132.13906
[8] Pratt, J.W.; Zeckhauser, R.J., Proper risk aversion, Econometrica, 55, 143-154, (1987) · Zbl 0612.90006
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. It attempts to reflect the references listed in the original paper as accurately as possible without claiming the completeness or perfect precision of the matching.