Re: problem code : 140609MICRO

Posted by Smriti on Jun 16, 2009; 12:32pm
URL: http://discussion-forum.276.s1.nabble.com/problem-code-140609MICRO-tp3075741p3086057.html

if no loss occurs then the individual's wealth is: w-xq
if the loss occurs then the individuals wealth is: w-d+x-xq
therefore expected wealth is:p(w-d+x-xq)+(1-p)(w-xq)
optimal level of insurance is derived from: expected wealth=w
so, x=pd/p-q
i am not sure about the fairness bit