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Artificial Intelligence  /  AI 0359  ·  Atom · ~20 seconds

Insurance, Rationally

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On a bent money-to-utility curve, a certain small premium can beat a small chance of ruin — so buyer and seller of a policy can both be rational at once.

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The buyer trades dollars-on-average for protection in utility; the insurer, pooling many curves, profits in dollars.

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The trade is rational against ruin-shaped risks — insuring trifles buys nothing the curve values.

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