Showing 1 - 10 of 986
Given the possibility to modify the probability of a loss, will a profit-maximizing insurer engage in loss prevention or is it in his interest to increase the loss probability? This paper investigates this question. First, we calculate the expected profit maximizing loss probability within an...
Persistent link: https://www.econbiz.de/10010395085
We develop a nonparametric procedure, called the lattice method, for testing the consistency of contingent consumption data with a broad class of models of choice under risk and under uncertainty. Our method allows for risk loving and elation seeking behavior and can be used to calculate, via...
Persistent link: https://www.econbiz.de/10011671892
Most theories of risky choice postulate that a decision maker maximizes the expectation of a Bernoulli (or utility or similar) function. We tour 60 years of empirical search and conclude that no such functions have yet been found that are useful for out-of-sample prediction. Nor do we find...
Persistent link: https://www.econbiz.de/10009251218
Building on the isomorphism between the theories of risk aversion and precautionary saving, an objective index of prudent behavior is introduced, which generalizes the riskiness index set forth by Aumann and Serrano (2008). A benchmark framework for the monotone relation between risk aversion...
Persistent link: https://www.econbiz.de/10013088201
Given the possibility to modify the probability of a loss, will a profit-maximizing insurer engage in loss prevention or is it in his interest to increase the loss probability? This paper investigates this question. First, we calculate the expected profit maximizing loss probability within an...
Persistent link: https://www.econbiz.de/10013048791
We show how optimal saving in a two-period model is affected when prudence and risk aversion of the underlying utility function change. Increasing prudence alone will induce higher savings only if, for certain combinations of the interest rate and the pure time discount rate, there is...
Persistent link: https://www.econbiz.de/10003772158
This paper studies the relation between concavity, stochastic or state dependent utility functions, and risk aversion. Using the common definition of risk aversion, but modified for state dependent preferences, we show that concavity does not imply risk aversion. Instead, it implies a weaker...
Persistent link: https://www.econbiz.de/10012844461
Persistent link: https://www.econbiz.de/10010362187
Persistent link: https://www.econbiz.de/10012121053
Persistent link: https://www.econbiz.de/10015394044