Application of the “Marketing Concept” in the Life Insurance Industry
Kahneman and Tversky proved that the preference of regular insurance over probabilistic insurance by expected utility maximizers was inconsistent with the risk-aversion hypothesis given the intuitive riskiness of the probabilistic insurance game. This note considers the idea of costly probabilistic insurance and proves that regular insurance would be preferred to probabilistic insurance for a risk-averse expected utility maximizer.
Volume (Year): 14 (1991)
Issue (Month): 2 ()
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