We examine in this paper a new natural restriction on utility functions, namely that an undesirable risk can never be made desirable by the presence of an independent, unfair risk. This concept is called weak properness. It generalizes the concept of properness (individually undesirable,...

We analyze in this paper the effect of age on the optimal dynamic strategy towards repeated independent gambles. When deciding to accept or to reject a lottery that is offered today, the gambler knows how many future lotteries can yet be played in the future. We first examine under which...

We examine the optimal risk-taking behaviour of a risk-averse individual under the assumption of a guaranteed floor for wealth (limited liability). We show that the existence of limited liability raises the optimal exposure to risk. Also, there is a positive lower bound to initial wealth...

We consider in this paper the interaction between precautionary savings and insurance demand. Under the standard intertemporal expected utility framework, the effect of an increase in the concavity of the utility function is ambiguous because of the inability of this framework to distinguish...

We consider a monopoly insurance company that is unable to estimate the value of covered assets at the time of underwriting. Only the distribution of the severity of losses is known. Also, an ex-post appraisal of the value of the property can be performed in case of accident. As in most property...

In this paper, we reconsider the Rothschild-Stiglitz equilibrium of an insurance market under adverse selection. We examine the case in which insurers have heterogenous private information about the policyholder's type. This raises the problem of the transmission of information among insurers....

This paper develops an adverse selection model which uncovers two mechanisms whereby Grameen-style peer grouping systems can trigger lower interest rates. In one extreme scenario, where participant borrowers do not have prior information about the type of their peers, lower interest rate are...