òòò½Íø Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Risk Aversion and Insurance Propensity
òòò½Íø Review
vol. 115,
no. 5, May 2025
(pp. 1597–1649)
Abstract
We provide a new foundation of risk aversion by showing that this attitude is fully captured by the propensity to seize insurance opportunities. In our main results, we first characterize Arrow-Pratt (1963–1964) risk aversion in terms of propensity to full insurance and the stronger notion of risk aversion of Rothschild and Stiglitz (1970) in terms of propensity to partial insurance. We then extend the analysis to comparative risk aversion by showing that the classical notion of Yaari (1969) corresponds to comparative propensity to full insurance, while the stronger notion of Ross (1981) corresponds to comparative propensity to partial insurance.Citation
Maccheroni, Fabio, Massimo Marinacci, Ruodu Wang, and Qinyu Wu. 2025. "Risk Aversion and Insurance Propensity." òòò½Íø Review 115 (5): 1597–1649. DOI: 10.1257/aer.20231529Additional Materials
JEL Classification
- D81 Criteria for Decision-Making under Risk and Uncertainty
- G22 Insurance; Insurance Companies; Actuarial Studies
- G52 Household Finance: Insurance