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
Publisher
Wiley-Blackwell Publishing, Inc.
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
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
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