ABSTRACT
The problem addressed in this article can be illustrated by considering the respon ses to a series of questions about automobile insurance asked of MBA students and academics: (1) Is your automobile insured against theft? (2) Do you know the cost of this insurance? (3) Do you know the probability that your automobile will be stolen while your insurance contract is in force? The first two questions usually elicit many positive responses. However, this is not the case for the third and in dicates that decisions concerning insurance are often made with vague knowledge concerning the probability’ of losses.
