IDEAS home Printed from
   My bibliography  Save this article

An Increase in Background Risk and Demand for Loss Reduction


  • Larry Y. Tzeng
  • Jen-Hung Wang


This paper extends the research about the impact of an increase in background risk from cases with one decision variable to those with two decision variables. We apply the results of Eeckhoudt and Kimball (1992) to examine the comparative statics of an increase in background risk on demand for loss reduction that depends on market insurance and self-insurance together. We find that individuals with decreasing absolute risk aversion and decreasing absolute prudence demand more loss reduction in the face of an increase in background risk, although they may not demand more market insurance or self-insurance.

Suggested Citation

  • Larry Y. Tzeng & Jen-Hung Wang, 2002. "An Increase in Background Risk and Demand for Loss Reduction," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 25(2), pages 127-141.
  • Handle: RePEc:wri:journl:v:25:y:2002:i:2:p:127-141

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Jiang, Chonghui & Ma, Yongkai & An, Yunbi, 2013. "International portfolio selection with exchange rate risk: A behavioural portfolio theory perspective," Journal of Banking & Finance, Elsevier, vol. 37(2), pages 648-659.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wri:journl:v:25:y:2002:i:2:p:127-141. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (James Barrese). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.