Suchergebnisse

Abstract
Applying a well-known argument of Karl Menger to an insurance version of the St. Petersburg Paradox (in which the decision maker is confronted with losses, rather than gains), one can assert that von Neumann-Morgenstern utility functions are necessarily concave upward and bounded below as decision-maker wealth tends to negative infinity. However, this argument is subject to two potential criticisms: (1) infinite-mean losses do not exist in the real world; and (2) the St. Petersburg Paradox derives its force from empirical observation (i. e., that actual decision makers would not agree to an arbitrarily large insurance bid price to transfer an infinite-mean loss), and thus does not impart logical necessity. In the present article, these two criticisms are addressed in turn. We first show that, although infinite-mean insurance losses technically do not exist, they do provide a reasonable model for certain large (i. e., excess and reinsurance) property-liability indemnities. We then employ the Two-Envelope Paradox to demonstrate the logical necessity of concave-upward, lower-bounded utility for arbitrarily small (i. e., negative) values of wealth. Finally, we note that recognizing the bounded, sigmoid nature of utility functions challenges certain fundamental understandings in the economics of insurance demand, and can lead to vastly different conclusions regarding the bid price for insurance.

Had the destruction and suffering visited upon New Orleans by Hurricane Katrina been the result of a terrorist attack, it would have been very successful — not because of the number of innocent lives lost or amount of property destroyed, but rather because of the breakdown of the social order. What better possible outcome could a terrorist envision than planting seeds of doubt regarding the willingness and ability of individuals and government to fulfill their respective roles in the `social contract'? In this article, we employ a class of symmetric, ordinal 2 × 2 games — including the frequently studied Prisoner's Dilemma, Chicken, and Stag Hunt — to model the stability of the social contract in the face of catastrophic changes in social relations. In two alternative analyses, we find that the Stag Hunt provides a relatively stable and efficient normative model for society. These results offer useful insights into the pre- and post-event management of catastrophe risks, especially large-scale terrorist attacks designed to disrupt the social order.

Had the destruction and suffering visited upon New Orleans by Hurricane Katrina been the result of a terrorist attack, it would have been very successful - not because of the number of innocent lives lost or amount of property destroyed, but rather because of the breakdown of the social order. What better possible outcome could a terrorist envision than planting seeds of doubt regarding the willingness and ability of individuals and government to fulfill their respective roles in the 'social contract'? In this article, we employ a class of symmetric, ordinal 2 x 2 games - including the frequently studied Prisoner's Dilemma, Chicken, and Stag Hunt - to model the stability of the social contract in the face of catastrophic changes in social relations. In two alternative analyses, we find that the Stag Hunt provides a relatively stable and efficient normative model for society. These results offer useful insights into the pre- and post-event management of catastrophe risks, especially large-scale terrorist attacks designed to disrupt the social order. [Reprinted by permission of Sage Publications Ltd., copyright 2008.]

Abstract
For many decades, the analysis of underwriting-profitability regimes (i. e. successive "hard" and "soft" markets) has formed an important topic in insurance research. In the present article, we study the characteristics of firm-level underwriting results by applying both ordinary and Markov-switching autoregressive models to data from individual U.S. property-liability companies. The research employs both univariate and multivariate methods. Our analysis argues against the existence of distinct, firm-level underwriting regimes in the U.S. property-liability market, but offers evidence of cross-company interactions over time.

We model the struggle between terrorist and conventional forces as a Colonel Blotto game, replacing Powers and Shen's (2006) mathematical expression for the probability of target destruction by a more rigorously derived approximation from a diffusion-based Lanchester analysis. We then use the resulting equilibrium solutions for force allocations and attack probabilities to make inferences about terrorist attackers and government defenders that are roughly consistent with empirical findings. Our analysis reveals that the loss function of a government/society plays a central role in determining the types of targets likely to be attacked by terrorists in "peacetime" and "wartime", leading to a much more frequent selection of "trophy" targets in peacetime.

We model the struggle between terrorist and conventional forces as a Colonel Blotto game, replacing Powers and Shen's (2006) mathematical expression for the probability of target destruction by a more rigorously derived approximation from a diffusion-based Lanchester analysis. We then use the resulting equilibrium solutions for force allocations and attack probabilities to make inferences about terrorist attackers and government defenders that are roughly consistent with empirical findings. Our analysis reveals that the loss function of a government/society plays a central role in determining the types of targets likely to be attacked by terrorists in "peacetime" and "wartime", leading to a much more frequent selection of "trophy" targets in peacetime.

The authors focus on a relatively unexplored aspect of the September 11, 2001, terrorist attacks—the extent to which it was ethically appropriate to compensate victims of that tragedy, especially in comparison to victims of other unfortunate events. After providing back-ground on federal disaster and victim compensation policies, the authors offer a set of principles for determining when the government should provide direct reimbursement to victims for losses incurred, drawing on both deontological and utilitarian reasoning. The authors then apply these standards to the September 11 attacks and other unfortunate events such as the Oklahoma City bombing.