First-order risk aversion happens when the risk premium a decision maker is willing to pay to avoid the lottery $t\cdot {\tilde \epsilon }, E[{\tilde \epsilon }]=0,$ is proportional, for small t, to t. Equivalently, $\partial \pi /\partial t\mid_{t=0^{+}} 0.$ We show that first-order risk...

This paper examines the effect of wealth on the demand for deductibles both theoretically and empirically for the case of flood insurance. Our study provides a synthesis and empirical examination of the economic theory of deductibles and its relationship with wealth. Previous articles have not...