Risk Aversion, Loss Aversion, and the Demand for Insurance
Louis Eeckhoudt (),
Anna Maria Fiori () and
Emanuela Rosazza Gianin ()
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Louis Eeckhoudt: Department of Economics and Quantitative Methods, IÉSEG School of Management, 3 rue de la Digue, 59000 Lille, France
Anna Maria Fiori: Department of Statistics and Quantitative Methods, University of Milano-Bicocca, Via Bicocca degli Arcimboldi 8, 20126 Milano, Italy
Emanuela Rosazza Gianin: Department of Statistics and Quantitative Methods, University of Milano-Bicocca, Via Bicocca degli Arcimboldi 8, 20126 Milano, Italy
Risks, 2018, vol. 6, issue 2, 1-19
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.
Keywords: first-order risk aversion; stochastic dominance; insurance; expected utility (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 M2 M4 K2 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:6:y:2018:i:2:p:60-:d:149051
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