This paper suggests insurance represents a quid pro quo transaction across states of the world and is purchased to transfer income to a state where it is more valued. It also suggests that gambling represent a similar quid pro quo transaction across states but that consumers gamble to transfer...

Expected utility theory holds that the demand for insurance is a demand for certainty, because under the conventional specification of the theory, it appears as if buyers of insurance prefer certain losses to actuarially equivalent uncertain ones. Empirical studies, however, show that...

This paper suggests that insurance represents a quid pro quo transaction across states of the world and is purchased because consumers desire to transfer income to a state where it is more valued. Preferences for certainty have little to do with the demand for insurance, but uncertainty itself...