I revisit the question of which motive underlies insurance demand. I draw on the literature of state-dependent utility … and on the literature of imperfectly divisible consumption to argue that the general purpose of insurance is not a risk … transfer, but meeting a conditional need. In this way, insurance aligns the risk in one's ftnancial endowment with the risk in …

A large empirical literature found that the correlation between insurance purchase and ex post realization of risk is … insurance a la Akerlof (1970), Pauly (1974) and Rothschild and Stiglitz (1976) where consumers have one … in a negative correlation in equilibrium between insurance coverage and ex post realization of risk. We show that if the …

A large empirical literature found that the correlation between insurance purchase and ex post realization of risk is … insurance a la Akerlof (1970), Pauly (1974) and Rothschild and Stiglitz (1976) where consumers have one … in a negative correlation in equilibrium between insurance coverage and ex post realization of risk. We show that if the …