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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

62P05 Applications of statistics to actuarial sciences and financial mathematics
91B16 Utility theory
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