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Non-Expected Utility and The Robustness of the Classical Insurance Paradigm

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  • Mark J. Machina

    (Department of Economics, University of California-San Diego, 92093-0508 La Jolla, California, USA)

Abstract

This paper uses the tools and techniques of generalized expected utility analysis to explore the robustness of some of the classical basic results in insurance theory to departures from the expected utility hypothesis on agents' risk preferences. The areas explored consist of individual demand for coinsurance and deductible insurance, the structure of Pareto-efficient bilateral insurance contracts, the structure of Pareto-efficient multilateral risk-sharing agreements, and self-insurance and self-protection. Most, though not all, of the basic results in this area are found to be quite robust to dropping the expected utility hypothesis. The Geneva Papers on Risk and Insurance Theory (1995) 20, 9–50. doi:10.1007/BF01098956

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal The Geneva Papers on Risk and Insurance Theory.

Volume (Year): 20 (1995)
Issue (Month): 1 (June)
Pages: 9-50

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Handle: RePEc:pal:genrir:v:20:y:1995:i:1:p:9-50

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Cited by:
  1. Giuseppe, DE FEO & Jean, HINDRIKS, 2005. "Efficiency of Competition in Insurance Markets with Adverse Selection," Discussion Papers (ECON - Département des Sciences Economiques) 2005042, Université catholique de Louvain, Département des Sciences Economiques.
  2. DE DONDER, Philippe & HINDRIKS, Jean, . "The politics of redistributive social insurance," CORE Discussion Papers RP -1674, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Carson, Richard T & Mitchell, Robert Cameron, 2000. "Public Preferences Towards Environmental Risks: The Case of Trihalomethanes," University of California at San Diego, Economics Working Paper Series qt12t5g549, Department of Economics, UC San Diego.
  4. Richard Carson & Theodore Groves, 2007. "Incentive and informational properties of preference questions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 37(1), pages 181-210, May.
  5. Nuno Garoupa, 1998. "Crime and punishment: Further results," Economics Working Papers 344, Department of Economics and Business, Universitat Pompeu Fabra.

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