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Self-Protection in the Expected-Utility-of-Wealth Model: An Impossibility Theorem

Author

Listed:
  • George Sweeney

    (Department of Economics, Vanderbilt University, Station B, Box 6058, 37235 Nashville TN)

  • T. Randolph Beard

    (Department of Economics, Thach Hall, Auburn University, 36849 Auburn AL)

Abstract

We investigate the possibility of ordering expected utility-of-wealth maximizers according to their propensities to purchase self-protection. We define one agent as “more cautious†than another (toward a loss of specific size given a specific initial wealth) if the first agent would spend more on self-protection than the other, so long- as the technological relationship between spending and loss probability belongs to a broad class of functions. We show that the expected-utility-of-wealth model does not allow for the possibility that one agent could be “more cautious†than another. The Geneva Papers on Risk and Insurance Theory (1992) 17, 147–158. doi:10.1007/BF00962711

Suggested Citation

  • George Sweeney & T. Randolph Beard, 1992. "Self-Protection in the Expected-Utility-of-Wealth Model: An Impossibility Theorem," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 17(2), pages 147-158, December.
    • Handle: RePEc:pal:genrir:v:17:y:1992:i:2:p:147-158
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    Cited by:

    1. Liqun Liu & Andrew Rettenmaier & Thomas Saving, 2009. "Conditional payments and self-protection," Journal of Risk and Uncertainty, Springer, vol. 38(2), pages 159-172, April.

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