Aspects of optimal insurance demand when there are uninsurable risks (Q1106604)
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scientific article; zbMATH DE number 4062432
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| English | Aspects of optimal insurance demand when there are uninsurable risks |
scientific article; zbMATH DE number 4062432 |
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Aspects of optimal insurance demand when there are uninsurable risks (English)
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1988
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This paper discusses insurance demand in the presence of uninsurable risks. It is shown that, when these risks are not independent of the insurable risk, expected utility theory can imply counterintuitive results. A solution is provided by applying \textit{M. J. Machina}'s theory of local utility functions [see Econometrica 50, 277-323 (1982; Zbl 0475.90015) and ibid., 1069-1079 (1982; Zbl 0509.90006)].
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optimal coinsurance
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insurance demand
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uninsurable risks
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expected utility
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local utility functions
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0.790855884552002
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0.7825654149055481
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0.7677713632583618
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0.7536712288856506
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0.7481900453567505
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