Does adverse selection hamper the effectiveness of voluntary risk sharing? How do differences in risk profiles affect adverse selection? We experimentally investigate individuals’ willingness to share risks with others. Across treatments we vary how risk profiles differ between individuals. We...

This paper suggests a new explanation for the low level of annuitization, which is valid even if one assumes perfect markets. We show that, as soon there is a positive bequest motive, sufficiently risk averse individuals should not purchase annuities. A model calibration accounting for lifetime...

Under the expected utility hypothesis a costless genetic test has, at worst, zero private value. This happens if it does not affect optimal decisions. If the genetic test facilitates better decision-making for at least one possible test outcome, then it has positive private value. This...

We report experimental findings about subjects’ behavior in dynamic decision problems involving multistage lotteries with different timings of resolution of uncertainty. Our within-subject design allows us to study violations of the independence and dynamic axioms: Dynamic Consistency,...

This paper analyzes whether social comparison can explain the low take-up of disaster insurance usually reported in field studies. We argue that risks in the case of disasters are highly correlated between subjects whereas risks for which high insurance take-up can be observed (e.g. extended...

Building on Kihlstrom and Mirman (Journal of Economic Theory, 8(3), 361–388, <CitationRef CitationID="CR4">1974</CitationRef>)’s formulation of risk aversion in the case of multidimensional utility functions, we study the effect of risk aversion on optimal behavior in a general consumer’s maximization problem under uncertainty. We...</citationref>

Risk aversion—but also the higher-order risk preferences of prudence and temperance—are fundamental concepts in the study of economic decision making. We propose a method to jointly measure the intensity of risk aversion, prudence, and temperance. Our theoretical approach is to define risk...

“Risk and insurance” provides an illustrative set of decisions made in the presence of uncertainty. As behavioral models become more integrated into economics and finance, many of their effects are illustrated quite well within insurance markets. Especially noteworthy are the complementary...

Subjective probabilities play a central role in many economic decisions and act as an immediate confound of inferences about behavior, unless controlled for. Several procedures to recover subjective probabilities have been proposed, but in order to recover the correct latent probability one must...

I analyze two expected utility models which abandon the consequentialist assumption of terminal wealth positions. In the expected utility of gambling wealth model, in which initial wealth is allowed to be small, I show that a large WTA/WTP gap is possible and the (Rabin in Econometrica, 68(5),...