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Browsing by Author "Nyman, John A."

Now showing 1 - 3 of 3
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    The Demand for Insurance: Expected Utility Theory from a Gain Perspective
    (Center for Economic Research, Department of Economics, University of Minnesota, 2001-07) Nyman, John A.
    Expected utility theory holds that the demand for insurance is a demand for certainty, because under the conventional specification of the theory, it appears as if buyers of insurance prefer certain losses to actuarially equivalent uncertain ones. Empirical studies, however, show that individuals actually prefer uncertain losses to actuarially equivalent certain ones. This paper attempts to reconcile expected utility theory with this empirical evidence by suggesting that insurance is demanded to obtain an income payoff in the "bad" state. This specification is mathematically equivalent to the conventional specification and consistent with this and other empirical evidence, but it implies that the demand for insurance has nothing to do with demand for certainty.
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    A Theory of Demand for Gambles
    (Center for Economic Research, Department of Economics, University of Minnesota, 2004-09) Nyman, John A.
    Although gambling is primarily an economic activity, no single theory of the demand for gambles has gained wide-spread acceptance among economists. This paper proposes a simple model of the demand for gambling that is based on the standard economic assumptions that (1) resources are scarce and (2) consumer's utility increases with income at a decreasing rate. This model has the advantages that (1) it is based solely on changes in income, (2) is potentially applicable to most consumers, (3) preserves the assumption of diminishing marginal utility of income, (4) is consistent with the insurance-buying gambler, and (5) has intuitive appeal.
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    The Welfare Economics of Insurance Contracts that Pay Off by Reducing Price
    (Center for Economic Research, Department of Economics, University of Minnesota, 1999-04) Nyman, John A.