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Risk Aversion, Loss Aversion, and the Demand for Insurance

Author

Listed:
  • Louis Eeckhoudt

    (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • Anna Fiori

    (UNIMIB - Università degli Studi di Milano-Bicocca = University of Milano-Bicocca)

  • Emanuela Rosazza Gianin

    (UNIMIB - Università degli Studi di Milano-Bicocca = University of Milano-Bicocca)

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.

Suggested Citation

  • Louis Eeckhoudt & Anna Fiori & Emanuela Rosazza Gianin, 2018. "Risk Aversion, Loss Aversion, and the Demand for Insurance," Post-Print hal-02987006, HAL.
    • Handle: RePEc:hal:journl:hal-02987006
    DOI: 10.3390/risks6020060
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    Citations

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    Cited by:

    1. Eling, Martin & Ghavibazoo, Omid & Hanewald, Katja, 2021. "Willingness to take financial risks and insurance holdings: A European survey," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 95(C).
    2. Ichiro Sumita & Naoki Toyama & Daisuke Ekuni & Takayuki Maruyama & Aya Yokoi & Daiki Fukuhara & Yoko Uchida-Fukuhara & Momoko Nakahara & Manabu Morita, 2022. "The Impact of Oral Health Behaviors, Health Belief Model, and Absolute Risk Aversion on the Willingness of Japanese University Students to Undergo Regular Dental Check-Ups: A Cross-Sectional Study," IJERPH, MDPI, vol. 19(21), pages 1-9, October.
    3. Sunday Stephen AJEMUNIGBOHUN & Sulaiman Ademola Oreshile, 2019. "Risk Aversion And Motor Insurance Demand: Empirical Evidence From Nigeria," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 2(47), pages 211-222, December.
    4. Jiakun Zheng, 2020. "Optimal insurance design under narrow framing," Post-Print hal-04227370, HAL.
    5. Zheng, Jiakun, 2020. "Optimal insurance design under narrow framing," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 596-607.
    6. Wang, Jianli & Liu, Liqun & Neilson, William S., 2020. "The participation puzzle with reference-dependent expected utility preferences," Insurance: Mathematics and Economics, Elsevier, vol. 93(C), pages 278-287.

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