On the shape of non-monetary measures for risks

Courbage, Christophe (Haute école de gestion de Genève, HES-SO // Haute Ecole Spécialisée de Suisse Occidentale) ; Loubergé, Henri (University of Geneva, Geneva School of Economics and Management, Swiss Finance Institute) ; Rey, Béatrice (Université de Lyon, Lyon, France)

This paper investigates how welfare losses for facing risks change as a function of the number of risk exposures. To that aim, we define the risk apportionment of order n (RA-n) utility premium as a measure of pain associated with facing the passage from one risk to a riskier one. Changes in risks are expressed through the specific concept of stochastic dominance of order n defined by Ekern (1980). Three configurations of risk exposures are considered. The paper first shows how the RA-n utility premium is modified when individuals wealth becomes riskier. This makes it possible to generalise earlier results on the topic. Second, the paper provides necessary and sufficient conditions on individual preferences for superadditivity and subadditivity of the RA-n utility premium. Third, the paper investigates welfare changes of merging increases in risks.


Conference Type:
full paper
Faculty:
Economie et Services
School:
HEG - Genève
Institute:
CRAG - Centre de Recherche Appliquée en Gestion
Subject(s):
Economie/gestion
Publisher:
Munich, Germany, 12-13 December 2016
Date:
Munich, Germany
12-13 December 2016
2016
Pagination:
15 p.
Published in:
Proceedings of the CEAR/MRIC Behavioral Insurance Workshop 2016
Appears in Collection:



 Record created 2017-03-09, last modified 2019-06-11

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