Artificial Intelligence / Unit 7 AI 0359 short lesson, about 20 seconds
Insurance, Rationally
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The idea
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.
In practice
The buyer trades dollars-on-average for protection in utility; the insurer, pooling many curves, profits in dollars.
Where people slip
The trade is rational against ruin-shaped risks — insuring trifles buys nothing the curve values.
Your place on the trail
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Builds on
Unlocks
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