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Titel
Risk attitudes with state-dependent indivisibilities in consumption / Markus Fels
VerfasserFels, Markus
ErschienenEssen, Germany : RWI - Leibniz-Institut für Wirtschaftsforschung, 2019 ; Bochum, Germany : Ruhr-Universität Bochum (RUB), Department of Economics, 2019
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Elektronische Ressource
Umfang1 Online-Ressource (43 Seiten) : Illustrationen
SerieRuhr economic papers ; #805
ISBN978-3-86788-933-9
URNurn:nbn:de:hbz:6:2-117984 
DOI10.4419/86788933 
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Risk attitudes with state-dependent indivisibilities in consumption [1.69 mb]
Zusammenfassung

Some consumption opportunities are both indivisible and only valuable in particular tates of nature. The existence of such state-dependent indivisible consumption opportunities influences a persons risk attitudes. In general, people are not risk averse anymore even if utility from divisible consumption is concave. I propose a definition of insurance in the context of state-dependent preferences and investigate the different motives underlying insurance demand. The same reasons that rule out risk aversion turn out to be the basis of a desire to insure. This calls into question the standard approach that bases insurance demand on risk aversion with important implications for policy and research.

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