Two-moment decision models are consistent with expected utility maximization only if the choice set or the agent's preferences are restricted. All currently available restrictions, such as quadratic utility or normality, are either theoretically deficient and/or empirically rejected. This paper...

This paper investigates aspects of insurance demand related to deductible insurance. In particular, an important issue concerning analysis of the optimal deductible level is resolved. A simple sufficient restriction on the pricing of insurance is given which ensures that the second order...

In this article, a general class of deterministic transformations that can be interpreted as changes in risk are identified. This provides a fourth characterization of a Rothschild-Stiglitz increase in risk. In addition, a particular subclass of these transformations, termed simple...

When the return to a risky asset is altered, an investor's optimal portfolio is likely to change. In working out the details of these changes for expected utility maximizing investors, previous research has focused on portfolios composed of one risky and one riskless asset or two independent...

Holding more of the riskless asset and insuring the risky asset are two ways to reduce portfolio risk. These methods can be employed jointly. As a result, the amount of insurance selected to indemnify against possible losses from holding a risky asset depends, in general, on the quantities of...