An agent-based model of rational optimism
by Pedro J. Gutiérrez Diez; Carlos R. Palmero
International Journal of Risk Assessment and Management (IJRAM), Vol. 21, No. 3, 2018

Abstract: We prove that, in standard insurance markets, rational agents have an incentive to choose as subjective probabilities those incurring in an optimism bias, since they imply real and objective net gains. Our agent-based model of insurance markets thus clarifies how rational optimism naturally appears and persists in insurance markets, opening up the possibility to explain the optimism bias observed in other environments on the basis of the theory of salient perturbations. Our findings are consistent with the empirical evidence showing a systematic and coherent moderate optimism bias of agents in the assessment of probabilities.

Online publication date: Fri, 03-Aug-2018

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Risk Assessment and Management (IJRAM):
Login with your Inderscience username and password:

    Username:        Password:         

Forgotten your password?


Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com