In this paper we analyze insurance demand when the utility function depends both upon final wealth and the level of …-order risk aversion, with the Omega measure, and with a tendency to over-insure modest risks that has been been extensively … documented in real insurance markets. …

. We derive new theoretical results on the effects of probability weighting in the context of common insurance demand … comparative statics. In a binary-risk model, probability weighting predicts higher demand than EU alone, explaining commonly …-impact risks or for insurance contracts exposed to nonperformance risk …