Risk-Pooling Arrangements Involving Individuals Feeling Regret or Rejoicing
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Mahito Okura
Abstract
This study examines how feelings of regret and rejoicing affect participation in risk-pooling arrangements. The main finding reveals that whether feelings of regret and rejoicing have positive or negative effects on participation in a risk-pooling arrangement depends on the forms of utility, regret, and rejoicing functions and the magnitude of accident probability. In a common situation in which the utility and rejoicing functions are strictly concave, the regret function is strictly convex, the magnitude of the accident probability is small, feeling regret promotes participation in a risk-pooling arrangement, whereas rejoicing might hinder participation. Hence, individuals who experience rejoicing do not participate in a risk-pooling arrangement when the degree of concavity of the rejoicing function is large, whereas individuals who do not experience rejoicing always choose to participate.
Funding source: JSPS KAKENHI
Award Identifier / Grant number: JP15K03727 and JP22K01587
Acknowledgments
The author is grateful to the anonymous reviewers. The early version of this study was presented at 2020 World Risk and Insurance Economics Congress (August 2020) and Insurance Seminar (September 2021). This work was supported by JSPS KAKENHI Grant Numbers JP15K03727 and JP22K01587.
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Research ethics: Not applicable.
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Informed consent: Not applicable.
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Author contributions: The author has accepted responsibility for the entire content of this manuscript and approved its submission.
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Use of Large Language Models, AI and Machine Learning Tools: None declared.
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Conflict of interest: The author states no conflict of interest.
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Research funding: This work was supported by JSPS KAKENHI Grant Numbers JP15K03727 and JP22K01587.
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Data availability: Not applicable.
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