Maximizing Insurance Buyers' Utility

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Abstract
This paper presents a normative analysis of the purchase of insurance by deducing decision rules for the purchase of the correct amounts and kinds of insurance by consumers. The merits of different types of insurance policies are evaluated in terms of consumers who possess concave downward quadratic utility functions. Such consumers represent one class of risk-avoiders in the classical sense of making choices under uncertainty which indicate diminishing marginal utilities for money.

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