Risk-Bearing And Consumption Theory

Denis Moffet

ASTIN Bulletin, 1975, vol. 8, issue 3, 342-358

Abstract: A simple risky situation is studied in the framework of consumption theory. Saving is shown to be a substitute to insurance. Two new concepts, riskbearing budget and effective risk coverage, are introduced in order to give a more accurate insight into the optimal risk-bearing decision. The effect of a variation in current consumption and in wealth upon the optimal insurance coverage is analysed.

Date: 1975
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