A Note on Partial Insurance and the Arrow-Pratt Measure of Risk Aversion
Pratt  establishes that a more risk-averse individual in the Arrow-Pratt sense has a higher compensating risk premium for full insurance, but no comparable result has been established for partial insurance. Ross  shows that a more risk-averse individual in the Arrow-Pratt sense may not be willing to pay more for a reduction in risk in the sense of mean-preserving contraction. We show that a more risk-averse individual in the Arrow-Pratt sense has a higher compensating risk premium for all empirically relevant forms of partial insurance because they induce a reduction in risk in the stronger sense of Bickel and Lemann . The Geneva Risk and Insurance Review (2005) 30, 35–40. doi:10.1007/s10836-005-1106-3
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Volume (Year): 30 (2005)
Issue (Month): 1 (June)
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