This paper discusses some aspects of the robustness of the classical insurance paradigm with respect to departures from the independence axiom of expected utility theory. The discussion focuses on the significance of the distinction between risk aversion and outcome convexity and the role of...

Kicking off the discussion following Savage's presentation at the 1952 Paris colloquium, Arrow raised what he considered to be a difficulty with the intuitive interpretation of Savage's theorem. It suggests that decision makers strictly prefer betting on an event of measure zero over betting on...

This paper shows that: (1) the "preference reversal" phenomenon can be consistent with transitive preferences if these preferences violate the independence axiom of expected utility theory and (2) for the class of experiments that were used to produce the evidence concerning "preference...

We present an axiomatic model depicting the choice behavior of a self-interest seeking moral individual over random allocation procedures. Individual preferences are decomposed into a self-interest component and a component representing the individual's moral value judgment. Each component has a...