This paper studies insurance demand for individuals with limited financial literacy. We propose uncertainty about insurance payouts, resulting from contract complexity, as a novel channel that affects decision-making of financially illiterate individuals. Then, a trade-off between second-order...

We study insurance markets with individuals that have limited financial literacy. In our model, complexity of insurance contracts causes individuals to be uncertain about insurance payouts. As a result, a trade-off between second-order (risk aversion) and third-order (prudence) risk preferences...

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...

We compile, generalize and extend the results about the comparative static effects of risk changes on optimal risk-reduction and saving behavior. We use the time-separable discounted expected-utility model and consider income risk, inflation risk, and interest rate risk. For each type of risk,...