Insurance demand and first order risk increases under (μ,σ)-preferences

Claudio Bonilla and Jose L. Ruiz

Finance Research Letters, 2014, vol. 11, issue 3, 219-223

Abstract: We study the optimal insurance demand in the μ,σ space when the decision-maker faces a first-order risk increase. In particular, we investigate the effect of an increase in the expected damage when the variance is held constant. An unambiguous result is derived on insurance demand that differs from previous results in the literature in that it does not depend on additional assumption such as DARA utility functions or the level of risk aversion elasticity.

Keywords: Insurance demand; Risk increase; Risk aversion; DARA preferences (search for similar items in EconPapers)
JEL-codes: D80 D81 G10 G11 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:11:y:2014:i:3:p:219-223

DOI: 10.1016/j.frl.2014.04.002

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