Individuals’ risk preferences are estimated and employed in a variety of settings, notably including choices in financial, labor, and product markets. Recent work, especially in financial economics, provides estimates of individuals’ coefficients of relative risk aversion (R’s) in excess...

Government relief is offered for a wide range of risks--natural disaster, economic dislocation, sickness, and injury. This article explores the effect of such relief on incentives and the allocation of risk in a model with private insurance. It is shown that government relief is inefficient,...

<Para ID="Par1">The government often provides relief against large risks, such as disasters. A simple, general rationale for this role of government is considered here that applies even when private contracting to share risks is not subject to market imperfections. Specifically, the optimal private sharing of...</para>