When risks are interdependent, loss-prevention activities of one agent influence the risks faced by others. The social return to an investment in loss-prevention is greater than the private return. From a perspective of social welfare, the market allocation is not optimal and leads to...

This paper makes two contributions to the insurance literature by studying optimal insurance policy indemnity schedules with policyholders' limited liability and background risk. First, generalizing a prominent approach by Huberman, Mayers, and Smith (1983), it is shown that a welfare subsidy in...

1. Introduction -- 2. Risk and Risk Perception: Why we are not Rational in the Face of Risk -- 3. Expected Utility, Prospect Theory, and the Allais Paradox: Why Reference Points are Important -- 4. Confirmation Bias and Anchoring Effect: Why the First Piece of Information is Key in Negotiations...

Cloud-Computing services are changing the risk situation of IT-outsourcing and represent a challenge for the insurance industry. The most important problem to guarantee insurability of these emerging risks is that they are not stochastically independent. On the one hand, the interdependent...

In view of the increasing intensity of terrorism worldwide, behavioral changes of households become visible. People tend to overvalue terror-related risks such that the subjective probability of terrorism events. Using microeconomic panel data of the elderly population from 13 European...