Models of the insurance markets and institutions are routinely based on expected utility. Since EU is being challenged by an increasing number of decision models, we examine whether EU-based models are robust in their predictions. To do so, we rework some basic models of optimal insurance...

This article explores the extent to which a decisionmaker's probabilities can be measured separately from his/her utilities by observing his/her acceptance of small monetary gambles. Only a partial separation is achieved: the acceptable gambles are partitioned into a set of "belief gambles,"...

This article examines rate regulation and the market share of insurers using exclusive agents, known as direct writers. Direct writers have lower market share in rate regulation states; however, the effect is observed in both the regulated automobile lines and the less regulated homeowners'...

The lottery payoff procedure does not successfully induce risk-neutral bidding behavior in first-price, sealed-bid auctions. This conclusion follows from both ordinary-least-squares estimation with natural data and least-absolute-deviation estimation with transformed data from numerous...

This article uses survey data obtained from Taiwan to investigate consumer perceptions of smoking risks and the linkage of these perceptions to smoking behavior. In our analysis, two equations are estimated: (1) risk perception, and (2) smoking probability. The simultaneity problem in estimating...

Experiments on first-price sealed-bid auctions with independent private values have shown that submitted bids typically exceed Nash-equilibrium predictions for risk-neutral bidders. Existing bidding models explains this phenomenon by assuming that the bidders are risk-averse and capable of...

This study examines whether bettors' risk preferences or overconfidence in choosing winners better explains their well documented preference for low-probability wagers. Although previous studies using racetrack data often suggest that risk-loving behavior explains long-shot preference, such data...

Using data from a large national sample, this article examines how individual differences in risk attitudes affect wage-risk tradeoffs. Smoking and seat belt use are used as proxies for individual willingness to bear risk. Workers who by their behavior indicate a high value of safety - e.g.,...