Making Decisions About Liability And Insurance: A Special Issue of the Journal of Risk and Uncertainty

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Colin F. Camerer, Howard Kunreuther
Springer Science & Business Media, Sep 30, 1993 - Business & Economics - 139 pages
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Two related trends have created novel challenges for managing risk in the United States. The first trend is a series of dramatic changes in liability law as tort law has expanded to assign liability to defendants for reasons other than negligence. The unpredictability of future costs induced by changes in tort law may be partly responsible for the second major trend known as the `liability crisis' - the disappearance of liability protection in markets for particularly unpredictable risks.
This book examines decisions people make about insurance and liability. An understanding of such decision making may help explain why the insurance crisis resulted from the new interpretations of tort law and what to do about it. The articles cover three kinds of decisions: consumer decisions to purchase insurance; insurer decisions about coverage they offer; and the decisions of the public about the liability rules they prefer, which are reflected in legislation and regulation. For each of these three kinds of decisions, normative theories such as expected utility theory can be used as benchmarks against which actual decisions are judged.
 

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Contents

Editors Comments
5
Intuitions about Penalties and Compensation in the Context of Tort Law
17
Framing Probability Distortions and Insurance Decisions
35
A Framework and an Application to Insurance Decisions
53
Insurer Ambiguity and Market Failure
71
Ambiguity and Risk Taking in Organizations
89
A Bimodal Response to Unlikely Events
95
The Risky Business of Insurance Pricing
117
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About the author (1993)

Colin F. Camerer is Rea A. and Lela G. Axline Professor of Business Economics at the California Institute of Technology. The author of numerous journal articles and book chapters, he teaches both cognitive psychology and economics.

Howard Kunreuther is the James G. Dinan Professor of Decision Sciences and Business and Public Policy at the Wharton School, University of Pennsylvania and co-director of the Wharton Risk Management and Decision Processes Center. He has a long-standing interest in ways that society can better manage low-probability, high-consequence events. Dr Kunreuther is a member of the World Economic Forum's Global Agenda Council on Insurance and Asset Management for 2011 2012 and in 2009 2010 served as co-chair of the Forum's Global Agenda Council on Leadership and Innovation for Reducing Risks from Natural Disasters. He is a Fellow of the American Association for the Advancement of Science and a Distinguished Fellow of the Society for Risk Analysis, which honored him with a Distinguished Achievement Award in 2001.

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