Kinked utility and the demand for human wealth and liability insurance

Hans-Werner Sinn

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: The paper advances the hypothesis that the ’gross wealth’ von Neumann/Morgenstern utility function is characterized by a horizontal branch for wealth levels below the socially guaranteed minimum wealth and analyses the implications of this property for human wealth and liability insurance. It turns out that the attractiveness of these kinds of insurance might, even for risk-averse people, be too low to satisfy the premium requirements of private insurance companies.

Date: 1982
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Published in European Economic Review 2 17(1982): pp. 149-162

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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:19909

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