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On Three Standard Results in the Theory of Insurance Demand by Liang Hong is a Economics, Econometrics and Finance article available to read on EtoBox.

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## Abstract This article re-examines three standard results in the theory of insurance demand: (i) full coverage with a fair premium and partial coverage with an unfair premium; (ii) insurance is an inferior good under decreasing absolute risk aversion (DARA) and (iii) insurance may be a Giffen good under DARA. It has been shown recently that (i) holds for the class of insurance policies in which maximum coverage fully covers the potential loss. We show that whether (i) holds beyond this class of policies is indeterminate. In addition, we employ a unified framework to investigate the effects of changes in initial wealth and price. In particular, we show that both (ii) and (iii) hold for a certain class of insurance policies which include all commonly-used types of policies. The result also provides a unified treatment of several results in the extant literature.

Who reads On Three Standard Results in the Theory of Insurance Demand?

Author

Liang Hong

Publisher

Walter de Gruyter GmbH

Published

2019

Language

EN

Field

Economics, Econometrics and Finance (Social Sciences)