Title

Fear of loss and happiness of win : properties and applications

Document Type

Journal article

Source Publication

Journal of Risk and Insurance

Publication Date

12-1-2010

Volume

77

Issue

4

First Page

749

Last Page

766

Abstract

This article proposes two coefficients, "fear of loss" (" FL ") and "happiness of win" (" HW "), to capture the variation of risk attitude with respect to wealth. Several properties of interpersonal comparisons of " FL " and " HW " are achieved. We present three applications in the default risk bargaining problem (Tibiletti, 2006) to demonstrate that these properties can deliver more shortcut bargaining conditions and unambiguous comparative static results in situations involving interpersonal risk exchanges. We show that " FL " and " HW " coefficients are instrumental in explaining the comparative diffidence between an insurer and an insured.

DOI

10.1111/j.1539-6975.2010.01364.x

Print ISSN

00224367

E-ISSN

15396975

Publisher Statement

Copyright © The Journal of Risk and Insurance, 2010

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Recommended Citation

Li, J. (2010). Fear of loss and happiness of win: Properties and applications. Journal of Risk and Insurance, 77(4), 749-766. doi: 10.1111/j.1539-6975.2010.01364.x