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Kinked utility and the demand for human wealth and liability insurance

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  • Sinn, Hans-Werner

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.
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Suggested Citation

  • Sinn, Hans-Werner, 1982. "Kinked utility and the demand for human wealth and liability insurance," European Economic Review, Elsevier, vol. 17(2), pages 149-162.
  • Handle: RePEc:eee:eecrev:v:17:y:1982:i:2:p:149-162
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    Cited by:

    1. M. Martin Boyer & Jörg Schiller, 2003. "Merging Automobile Insurance Regulatory Bodies: The Case of Atlantic Canada," CIRANO Working Papers 2003s-70, CIRANO.
    2. Hans-Werner Sinn, 2004. "The New Systems Competition," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 5(1), pages 23-38, February.
    3. Giancarlo Corsetti & Michael P. Devereux & John Hassler & Gilles Saint-Paul & Hans-Werner Sinn & Jan-Egbert Sturm & Xavier Vives, 2011. "Chapter 5: Taxation and Regulation of the Financial Sector," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 147-169, February.
    4. Roland Eisen, 1986. "Wettbewerb und Regulierung in der Versicherung. Die Rolle asymmetrischer Information," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 122(III), pages 339-358, September.
    5. Scott E. Harrington, 2010. "The Health Insurance Reform Debate," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(1), pages 5-38.
    6. Gilad Sorek & David Benjamin, 2016. "Health insurance mandates in a model with consumer bankruptcy," Journal of Regulatory Economics, Springer, vol. 50(2), pages 233-250, October.
    7. Joachim Ragnitz & Marcel Thum, 2013. "Pflichtversicherung gegen Flutschäden?," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 20(05), pages 33-35, October.
    8. Lisa L. Posey & Vickie Bajtelsmit, 2017. "Insurance and Endogenous Bankruptcy Risk: When is it Rational to Choose Gambling, Insurance, and Potential Bankruptcy?," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 42(1), pages 15-40, March.
    9. Hans Gersbach, 2013. "Preventing Banking Crises--with Private Insurance?," CESifo Economic Studies, CESifo, vol. 59(4), pages 609-627, December.
    10. Jakob Eberl & Darko Jus, 2012. "Evaluating policies to attain the optimal exposure to nuclear risk," RSCAS Working Papers 2012/50, European University Institute.
    11. Wolfgang Buchholz & Kai A. Konrad, 2014. "Taxes on risky returns — an update," Working Papers tax-mpg-rps-2014-10, Max Planck Institute for Tax Law and Public Finance.
    12. Hans-Werner Sinn, 2002. "Risktaking, Limited Liability, and the Competition of Bank Regulators," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 59(3), pages 305-305, August.
    13. Robledo, Julio R., 1999. "Strategic risk taking when there is a public good to be provided privately," Journal of Public Economics, Elsevier, vol. 71(3), pages 403-414, March.
    14. Zuleta Hernando, 2008. "Poor People and Risky Business," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 14(1), pages 1-18, April.
    15. repec:ces:ifodic:v:11:y:2014:i:4:p:19105947 is not listed on IDEAS
    16. Christian Leßmann & Joachim Ragnitz & Beate Schirwitz & Marcel Thum & Susan Kühn & Christian Thater, 2008. "Revolvierende Fonds als Instrument zur Neuausrichtung der Förderpolitik : Gutachten im Auftrag der Sächsischen Landesbank (SAB)," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 44, October.
    17. Hielscher, Stefan & Vennemann, Till, 2013. "Harnessing CSR for the innovation capacity of the capitalistic firm: A conceptual approach for how to use CSR in and for innovation management," Discussion Papers 2013-10, Martin Luther University of Halle-Wittenberg, Chair of Economic Ethics.
    18. Hans-Werner Sinn, 2002. "Der neue Systemwettbewerb," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 3(4), pages 391-407, November.
    19. Eberl, Jakob & Jus, Darko, 2012. "The year of the cat: Taxing nuclear risk with the help of capital markets," Energy Policy, Elsevier, vol. 51(C), pages 364-373.
    20. Florian Buck, 2014. "Financial Regulation and the Grabbing Hand," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(4), pages 03-13, 01.
    21. Boyer, M. Martin & Schiller, Jörg, 2003. "Merging automobile regulatory bodies: The case of Atlantic Canada," Working Papers on Risk and Insurance 11, University of Hamburg, Institute for Risk and Insurance.

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