Insurance Demand Without the Expected-Utility Paradigm

J. OF RISK AND INSURANCE, Vol. 64 No. 1, March 1997

Posted: 10 Jun 1997

See all articles by Harris Schlesinger

Harris Schlesinger

University of Alabama; CESifo (Center for Economic Studies and Ifo Institute)

Abstract

This article focuses on two cornerstone results in insurance economics: Mossin's Theorem on the optimality of full versus partial coverage, and Arrow's Theorem on the optimality of straight deductible policies. Both of these results are examined in a model assuming only risk aversion, and not necessarily expected-utility maximization. The results also are examined with the inclusion of a noninsurable background risk. Arrow's result is robust enough to hold in all of these situations. Mossin's result is shown to hold with a slight weakening, to account for possible "nonsmoothness" of preferences in non-expected-utility models.

JEL Classification: D81, G22

Suggested Citation

Schlesinger, Harris, Insurance Demand Without the Expected-Utility Paradigm. J. OF RISK AND INSURANCE, Vol. 64 No. 1, March 1997, Available at SSRN: https://ssrn.com/abstract=8358

Harris Schlesinger (Contact Author)

University of Alabama ( email )

P.O. Box 870244
200 Alston Hall, Box 870224
Tuscaloosa, AL 35487
United States
205-348-7858 (Phone)
205-348-0590 (Fax)

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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