2015年9月

# Expected utility and catastrophic consumption risk

INSURANCE MATHEMATICS & ECONOMICS
• Masako Ikefuji
• ,
• Roger J. A. Laeven
• ,
• Jan R. Magnus
• ,
• Chris Muris

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DOI
10.1016/j.insmatheco.2015.06.007

ELSEVIER SCIENCE BV

An expected utility based cost-benefit analysis is, in general, fragile to distributional assumptions. We derive necessary and sufficient conditions on the utility function of consumption in the expected utility model to avoid this. The conditions ensure that expected (marginal) utility of consumption and the expected intertemporal marginal rate of substitution that trades off consumption and self-insurance remain finite, also under heavy-tailed distributional assumptions. Our results are relevant to various fields encountering catastrophic consumption risk in cost-benefit analysis. (C) 2015 Elsevier B.V. All rights reserved.

Web of Science ® 被引用回数 : 8

リンク情報
DOI
https://doi.org/10.1016/j.insmatheco.2015.06.007
Web of Science