This paper analyzes a market in which individuals can purchase guaranteed renewable insurance policies to insure against the risk of loss in the current period and the risk of an increased probability of loss. Individuals who cannot borrow will purchase partially guaranteed renewable insurance...

This paper explores how some widely studied classes of nonexpected utility models could be used in dynamic choice situations. A new 'sequential consistency' condition is introduced for single-stage and multi-stage decision problems. Sequential consistency requires that if a decision maker has...

This paper investigates a multiple-period level premium insurance policy equilibrium in a model in which loss probabilities increase for a fixed time period for a set of persons buying insurance in a group. We show that a level-premium sequence which induces risk averse persons to become and...

Amos Tversky investigated and explained a wide range of phenomena that lead to anomalous human decisions. His two most significant contributions, both written with Daniel Kahneman, are the decision-making heuristics--representativeness, availability, and anchoring--and prospect theory. Tversky's...

The intra-industry effect of Lloyd's financial distress on publicly traded US insurance companies is examined. Given Lloyd's prominence in the international insurance industry, large losses raised questions about the industry's capacity for certain types of risks and the financial solvency of...

Standard tools for the analysis of economic problems involving uncertainty, including risk premiums, certainty equivalents and the notions of absolute and relative risk aversion, are developed without making specific assumptions on functional form beyond the basic requirements of monotonicity,...

Self-insurance and self-protection have been discussed separately in the literature. However, as observed in practice, many actions individuals take to modify a potential loss serve both as self-insurance and as self-protection. Given this practical importance of self-insurance-cum-protection...

Investments in protective measures involve an initial immediate cost in exchange for a stream of potential benefits accruing over time in the form of reduced expected losses. This paper describes two studies in which individuals were asked both to make choices and indicate the maximum amount...

This paper investigates biases in the perceptions of probabilities using data from the 1989 and 1994 seasons at the Woodlands greyhound park in Kansas City, Kansas. Results reveal consistent evidence that the gambler's fallacy exists. The results also reveal that gamblers overestimate the...