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Choices at various levels of uncertainty: An experimental test of the restated diversification theorem
Centre for Labour Market Policy Research (CAFO), School of Management and Economics, Växjö University Sweden.ORCID iD: 0000-0002-1798-8284
Linköping University, Department of Management and Engineering, Economics. Linköping University, Faculty of Arts and Sciences.
2006 (English)In: Journal of Risk and Uncertainty, ISSN 0895-5646, E-ISSN 1573-0476, Vol. 33, no 3, 183-196 p.Article in journal (Refereed) Published
Abstract [en]

Our "Restated diversification theorem" (Skogh and Wu, 2005) says that risk-averse agents may pool risks efficiently without assignment of subjective probabilities to outcomes, also at genuine uncertainty. It suffices that the agents presume that they face equal risks. Here, the theorem is tested in an experiment where the probability of loss, and the information about this probability, varies. The result supports our theorem. Moreover, it tentatively supports an evolutionary theory of the insurance industry-starting with mutual pooling at uncertainty, turning into insurance priced ex ante when actuarial information is available. © Springer Science + Business Media, LLC 2006.

Place, publisher, year, edition, pages
Springer Science+Business Media B.V., 2006. Vol. 33, no 3, 183-196 p.
Keyword [en]
Loss sharing . Insurance . Risk . Ambiguity . Uncertainty . Experiment
National Category
Engineering and Technology
URN: urn:nbn:se:liu:diva-43412DOI: 10.1007/s11166-006-0332-0Local ID: 73771OAI: diva2:264271
Available from: 2009-10-10 Created: 2009-10-10 Last updated: 2015-03-06

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Ahmed, Ali M.Skogh, Göran
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