In this paper we analyze insurance demand when the utility function depends both upon final wealth and the level of losses or gains relative to a reference point. Besides some comparative statics results, we discuss the links with first-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
Eeckhoudt, L., Fiori, A., Rosazza Gianin, E. (2018). Risk Aversion, Loss Aversion, and the Demand for Insurance. RISKS, 6(2) [10.3390/risks6020060].
Risk Aversion, Loss Aversion, and the Demand for Insurance
Fiori, A
;Rosazza Gianin, E
2018
Abstract
In this paper we analyze insurance demand when the utility function depends both upon final wealth and the level of losses or gains relative to a reference point. Besides some comparative statics results, we discuss the links with first-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
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