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Willingness to Pay for Risk Reduction and Risk Aversion without the Expected Utility Assumption

Author

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  • Eric Langlais

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

Abstract

By means of minimal assumptions on the individual preferences, I show that the Willingness To Pay (WTP) for both a FSD and SSD reduction of risk is the sum of a mean effect, a pure risk effect and a wealth effect. As a result, the WTP of a risk-averse decision maker may be lower than the WTP of a risk-neutral one, for a large class of individual preferences' representation and a large class of risks.

Suggested Citation

  • Eric Langlais, 2005. "Willingness to Pay for Risk Reduction and Risk Aversion without the Expected Utility Assumption," Post-Print hal-00279144, HAL.
    • Handle: RePEc:hal:journl:hal-00279144
    DOI: 10.1007/s11238-005-7303-9
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    Citations

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    Cited by:

    1. Jean-Louis Arcand & Linguère M'Baye, 2013. "Braving the waves: the role of time and risk preferences in illegal migration from Senegal," CERDI Working papers halshs-00855937, HAL.
    2. Jean-Louis Arcand & Linguère M'Baye, 2011. "Braving the waves: The economics of clandestine migration from Africa," CERDI Working papers halshs-00575606, HAL.
    3. Eric LANGLAIS, 2009. "Deterrence Of A Criminal Team: How To Rely On Its Members' Short Comings ?," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 4(1(7)_ Spr).
    4. Neji Saidi, 2022. "Willingness to pay, surplus and Insurance policy under dual theory," Papers 2204.04794, arXiv.org.
    5. Amy K. Donahue, 2014. "Risky Business: Willingness to Pay for Disaster Preparedness," Public Budgeting & Finance, Wiley Blackwell, vol. 34(4), pages 100-119, December.
    6. Sarah Bensalem & Nicolás Hernández Santibáñez & Nabil Kazi-Tani, 2020. "Prevention efforts, insurance demand and price incentives under coherent risk measures," Post-Print hal-01983433, HAL.
    7. repec:hal:wpaper:hal-01983433 is not listed on IDEAS
    8. Bensalem, Sarah & Santibáñez, Nicolás Hernández & Kazi-Tani, Nabil, 2020. "Prevention efforts, insurance demand and price incentives under coherent risk measures," Insurance: Mathematics and Economics, Elsevier, vol. 93(C), pages 369-386.
    9. Christophe Courbage & Richard Peter & Béatrice Rey & Nicolas Treich, 2025. "Prevention and Precaution," Springer Books, in: Georges Dionne (ed.), Handbook of Insurance, edition 0, pages 27-53, Springer.
    10. Mila Bravo & Dylan Jones & David Pla-Santamaria & Francisco Salas-Molina, 2022. "Encompassing statistically unquantifiable randomness in goal programming: an application to portfolio selection," Operational Research, Springer, vol. 22(5), pages 5685-5706, November.

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