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Some new results about optimal insurance demand under uncertainty

Author

Listed:
  • Huang, Baoan
  • Miao, Jianjun
  • Zhang, Zongliang
  • Zhao, Dianbo

Abstract

The aim of this paper is to investigate the optimal insurance demand of a risk-averse agent who is faced with background uncertainty. The preferences of the agent are represented by two-moment, mean-standard deviation utility functions. By the comparative statics, we find that under the assumption of decreasing absolute risk aversion (DARA), the changes of background uncertainty have effects on optimal insurance demand.

Suggested Citation

  • Huang, Baoan & Miao, Jianjun & Zhang, Zongliang & Zhao, Dianbo, 2016. "Some new results about optimal insurance demand under uncertainty," Finance Research Letters, Elsevier, vol. 17(C), pages 280-284.
    • Handle: RePEc:eee:finlet:v:17:y:2016:i:c:p:280-284
    DOI: 10.1016/j.frl.2016.03.026
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    References listed on IDEAS

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    1. Georges Dionne & Christian Gollier, 1992. "Comparative Statics Under Multiple Sources of Risk with Applications to Insurance Demand," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 17(1), pages 21-33, June.
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    8. Wagener, Andreas, 2003. "Comparative statics under uncertainty: The case of mean-variance preferences," European Journal of Operational Research, Elsevier, vol. 151(1), pages 224-232, November.
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    10. Fanny Demers & Michel Demers, 1991. "Increases in Risk and the Optimal Deductible," Carleton Economic Papers 91-03, Carleton University, Department of Economics, revised Dec 1991.
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    Cited by:

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    More about this item

    Keywords

    Background uncertainty; Decreasing absolute risk aversion; (μ; σ) preferences; Optimal insurance demand;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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