This paper expounds on the importance of identifiabilty of subjective probabilities in agency theory with moral hazard. An application to insurance is examined. The Geneva Risk and Insurance Review (2008) 33, 1–18. doi:10.1057/grir.2008.7

In this paper the author develops measures of absolute risk aversion for preference relations on risky prospects that are state-dependent and are representable by Frechet differentiable, nonlinear, functionals. A comparative statics analysis of optimal air travel insurance coverage illustrates...