scholarly journals The General Economic Premium Principle

1984 ◽  
Vol 14 (1) ◽  
pp. 13-21 ◽  
Author(s):  
Hans Bühlmann
Keyword(s):  
Risk Aversion ◽  
Utility Functions ◽  
Exponential Utility ◽  
Risk Averse ◽  
Existence Of Equilibrium ◽  
Easy Proof ◽  
Quantitative Results

AbstractWe give an extension of the Economic Premium Principle treated in Astin Bulletin, Volume 11 where only exponential utility functions were admitted. The case of arbitrary risk averse utility functions leads to similar quantitative results. The role of risk aversion in the treatment is essential. It also permits an easy proof for the existence of equilibrium.

scholarly journals Choices in the 11–20 Game: The Role of Risk Aversion

Games ◽  
2018 ◽  
Vol 9 (3) ◽  
pp. 53
Author(s):  
King Li ◽  
Kang Rong
Keyword(s):  
Nash Equilibrium ◽  
Risk Aversion ◽  
Risk Averse ◽  
Lab Experiment ◽  
Risk Neutral ◽  
Beauty Contest ◽  
Game Players

Arad and Rubinstein (2012, AER) proposed the 11–20 money request game as an alternative to the P beauty contest game for measuring the depth of thinking. In this paper, we show theoretically that in the Nash equilibrium of the 11–20 game players are more likely to choose high numbers if they are risk-averse rather than risk neutral. Hence, the depth of thinking measured in the 11–20 game is biased by risk aversion. Based on a lab experiment, we confirm this hypothesis empirically.

The Determinants of Risk Aversion: The Role of Intergenerational Transmission

2013 ◽  
Vol 14 (2) ◽  
pp. 214-234 ◽  
Author(s):  
Maria De Paola
Keyword(s):  
Risk Aversion ◽  
Intergenerational Transmission ◽  
Individual Characteristics ◽  
Risk Attitudes ◽  
Risk Averse ◽  
The Public ◽  
Measures Of Risk ◽  
High Ability Students ◽  
The Relationship

AbstractThis article studies the relationship between risk attitudes and individual characteristics focusing on the intergenerational transmission of risk preferences. We use a dataset of a sample of Italyn students which allows us to build different measures of risk aversion based, respectively, on a survey asking students about their willingness to invest in a risky asset and about their preferences for job security and on the results of an entry test using explicit penalty points in the case of incorrect answers. In line with the findings highlighted by the existing literature, we find that women are more risk averse than men, more patient subjects are more risk averse, while high-ability students are less risk averse. As far as intergenerational transmission of preferences is concerned, it emerges that students whose fathers are entrepreneurs have a higher propensity to take risks, while students whose fathers are employed in the public sector are more risk averse. Only fathers matter with regards to their children’s risk attitudes. These results are robust to different measures of risk aversion and to different specifications of our model.

scholarly journals Why Buy Accident Forgiveness Policies? An Experiment

2018 ◽  
Vol 10 (8) ◽  
pp. 1
Author(s):  
Fan Liu
Keyword(s):  
Decision Making ◽  
Risk Aversion ◽  
Time Preferences ◽  
Purchase Decision ◽  
Risk Attitudes ◽  
Purchase Decisions ◽  
Risk Averse ◽  
Product Price ◽  
High Degree

Risk and time preferences influence the insurance purchase decisions under uncertainty. Accident forgiveness, often considered as “premium insurance,” protects policyholders against a premium increase in the next period if an at-fault accident occurs. In this paper, by conducting a unique experiment in the controlled laboratory conditions, we examine the role of risk and time preferences in accident forgiveness purchase decisions. We find that individual discount rates and product price significantly affect premium insurance purchase decision. Interestingly, we also find evidence that less risk averse policyholders in general behave more like risk neutral when making insurance decision. Risk attitudes affect insurance decision-making only among those who have relatively high degree of risk aversion.

scholarly journals Pareto Optimality and Equilibrium in an Insurance Market

2008 ◽  
Vol 38 (2) ◽  
pp. 441-459 ◽  
Author(s):  
Alexey Y. Golubin
Keyword(s):  
Risk Aversion ◽  
Existence Theorem ◽  
Pareto Optimality ◽  
Market Risk ◽  
Utility Functions ◽  
Economic Equilibrium ◽  
Exponential Utility ◽  
Insurance Market ◽  
Reinsurance Market

The concept of economic equilibrium under uncertainty is applied to a model of insurance market where, in distinction to the classic Borch’s model of a reinsurance market, risk exchanges are allowed between the insurer and each insured only, not among insureds themselves. Conditions characterizing an equilibrium are found. A variant of the conditions, based on the Pareto optimality notion and involving risk aversion functions of the agents, is derived. An existence theorem is proved. Computation of the market premiums and optimal indemnities is illustrated by an example with exponential utility functions.

scholarly journals Pareto Optimality and Equilibrium in an Insurance Market

2008 ◽  
Vol 38 (02) ◽  
pp. 441-459 ◽  
Author(s):  
Alexey Y. Golubin
Keyword(s):  
Risk Aversion ◽  
Existence Theorem ◽  
Pareto Optimality ◽  
Market Risk ◽  
Utility Functions ◽  
Economic Equilibrium ◽  
Exponential Utility ◽  
Insurance Market ◽  
Reinsurance Market

The concept of economic equilibrium under uncertainty is applied to a model of insurance market where, in distinction to the classic Borch’s model of a reinsurance market, risk exchanges are allowed between the insurer and each insured only, not among insureds themselves. Conditions characterizing an equilibrium are found. A variant of the conditions, based on the Pareto optimality notion and involving risk aversion functions of the agents, is derived. An existence theorem is proved. Computation of the market premiums and optimal indemnities is illustrated by an example with exponential utility functions.

Eliciting Risk Preferences and Elasticity of Substitution

2020 ◽  
Vol 17 (4) ◽  
pp. 314-329
Author(s):  
Johan Burgaard ◽  
Mogens Steffensen
Keyword(s):  
Risk Aversion ◽  
Discount Rate ◽  
Predictive Power ◽  
Recursive Utility ◽  
Risk Averse ◽  
Indirect Utility ◽  
Consistent Estimation ◽  
On Certainty ◽  
Certainty Equivalents ◽  
Elasticity Of Intertemporal Substitution

Risk aversion and elasticity of intertemporal substitution (EIS) are separated via the celebrated recursive utility building on certainty equivalents of indirect utility. Based on an alternative separation method, we formulate a questionnaire for simultaneous and consistent estimation of risk aversion, subjective discount rate, and EIS. From a representative group of 1,153 respondents, we estimate parameters for these preferences and their variability within the population. Risk aversion and the subjective discount rate are found to be in the orders of 2 and 0, respectively, not diverging far away from results from other studies. Our estimate of EIS in the order of 10 is larger than often reported. Background variables like age and income have little predictive power for the three estimates. Only gender has a significant influence on risk aversion in the usually perceived direction that females are more risk-averse than males. Using individual estimates of preference parameters, we find covariance between preferences toward risk and EIS. We present the background reasoning on objectives, the questionnaire, a statistical analysis of the results, and economic interpretations of these, including relations to the literature.

scholarly journals Power, the Pacific Islands, and the Prestige Press: A Case Study of How Climate Reporting is Influenced by UN Framework Convention on Climate Change Summits

2021 ◽  
pp. 194016122110180
Author(s):  
Meghan M. Shea ◽  
James Painter ◽  
Shannon Osaka
Keyword(s):  
Climate Change ◽  
Media Coverage ◽  
Pacific Islands ◽  
Structured Interviews ◽  
The Pacific ◽  
Emotional Appeals ◽  
Issue Attention ◽  
Quantitative Results

While studies have investigated UN Framework Convention on Climate Change (UNFCCC) meetings as drivers of climate change reporting as well as the geopolitical role of Pacific Islands in these international forums, little research examines the intersection: how media coverage of Pacific Islands and climate change (PICC) may be influenced by, or may influence, UNFCCC meetings. We analyze two decades of reporting on PICC in American, British, and Australian newspapers—looking at both volume and content of coverage—and expand the quantitative results with semi-structured interviews with journalists and Pacific stakeholders. Issue attention on PICC increases and the content changes significantly in the periods around UNFCCC meetings, with shifts from language about vulnerability outside of UNFCCC periods to language about agency and solutions. We explore the implications of these differences in coverage for both agenda setting and the amplification of emotional appeals in UNFCCC contexts.

scholarly journals Market-based instruments for risk-averse farmers: rubber agroforest conservation in Jambi Province, Indonesia

2016 ◽  
Vol 22 (2) ◽  
pp. 133-155 ◽  
Author(s):  
Utkur Djanibekov ◽  
Grace B. Villamor
Keyword(s):  
Income Inequality ◽  
Risk Aversion ◽  
Real Options ◽  
Risk Averse ◽  
Variance Model ◽  
Income Uncertainty ◽  
Real Options Approach ◽  
Pigovian Taxes ◽  
Rubber Agroforest ◽  
Mean Variance

AbstractThis paper investigates the effectiveness of different market-based instruments (MBIs), such as eco-certification premiums, carbon payments, Pigovian taxes and their combination, to address the conversion of agroforests to monoculture systems and subsequent effects on incomes of risk-averse farmers under income uncertainty in Indonesia. For these, the authors develop a farm-level dynamic mean-variance model combined with a real options approach. Findings show that the conservation of agroforest is responsive to the risk-aversion level of farmers: the greater the level of risk aversion, the greater is the conserved area of agroforest. However, for all risk-averse farmers, additional incentives in the form of MBIs are still needed to prevent conversion of agroforest over the years, and only the combination of MBIs can achieve this target. Implementing fixed MBIs also contributes to stabilizing farmers’ incomes and reducing income risks. Consequently, the combined MBIs increase incomes and reduce income inequality between hardly and extremely risk-averse farmers.

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