<p>In my research, I want to compare <em>the gain in utility by purchasing an insurance product</em> across different cases. Here, utility refers to the utility from the consumption and bequest of an individual in the future.</p>
<p>Let me illustrate the case here. For example:</p>
<p>When the risk aversion is 2, the utility is measured at 10. If this individual purchases insurance, the utility becomes 13.</p>
<p>When the risk aversion is 5, the utility is measured at 5. If this individual purchases insurance, the utility becomes 7.</p>
<p>The question I want to answer is: which individual benefits more from purchasing insurance? One with risk aversion 2 or 5?</p>
<p>In particular, is it possible to compare the gain in utility between these two cases by absolute/relative change in utility? Is there a well known literature?</p>
<p>Thank you!</p>

CC BY-SA 4.0
2024-07-08T09:19:30.273Z
How is this utility "measured"?
VARulle
CC BY-SA 4.0
2024-07-08T11:20:57.697Z
I used The Epstein-Zin recursive utility which separately incorporates risk aversion parameter and the elasticity of intertemporal substitution parameter. I used simulated lifetime path to numerically estimate the utility. Higher value means higher satisfaction an individual would perceive.
ononon P
CC BY-SA 4.0
2024-07-09T12:54:37.443Z
As far as I know this is an ordinal utility function, so utility differences are meaningless apart from their sign.
VARulle
CC BY-SA 4.0
2024-07-09T23:35:47.193Z
Thank you very much for your answer! That really helps.
ononon P
<utility><insurance>
Compare utility gains
ononon P
# Compare utility gains

(Asked by: username_0 on 2024-07-08)

In my research, I want to compare *the gain in utility by purchasing an insurance product* across different cases. Here, utility refers to the utility from the consumption and bequest of an individual in the future.

Let me illustrate the case here. For example:

When the risk aversion is 2, the utility is measured at 10. If this individual purchases insurance, the utility becomes 13.

When the risk aversion is 5, the utility is measured at 5. If this individual purchases insurance, the utility becomes 7.

The question I want to answer is: which individual benefits more from purchasing insurance? One with risk aversion 2 or 5?

In particular, is it possible to compare the gain in utility between these two cases by absolute/relative change in utility? Is there a well known literature?

Thank you!

**Tags:** utility, insurance

> **Comments:**
> **username_1**: How is this utility "measured"?  
> **username_0**: I used The Epstein-Zin recursive utility which separately incorporates risk aversion parameter and the elasticity of intertemporal substitution parameter. I used simulated lifetime path to numerically estimate the utility. Higher value means higher satisfaction an individual would perceive.  
> **username_1**: As far as I know this is an ordinal utility function, so utility differences are meaningless apart from their sign.  
> **username_0**: Thank you very much for your answer! That really helps.  

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