The Theory of Insurance Demand



This chapter presents the basic theoretical model of insurance demand in a one-period expected-utility setting. Models of coinsurance and of deductible insurance are examined along with their comparative statics with respect to changes in wealth, prices and attitudes towards risk. The single risk model is then extended to account for multiple risks such as insolvency risk and background risk. It is shown how only a subset of the basic results of the single-risk model is robust enough to extend to models with multiple risks.


Risk Aversion Stochastic Dominance Default Risk Background Risk Final Wealth 
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Copyright information

© Springer Science + Business media, New York 2013

Authors and Affiliations

  1. 1.University of AlabamaTuscaloosaUSA

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