The impact of prudence on optimal prevention revisited

We re-examine the link between absolute prudence and self-protection activities. We show that the level of effort chosen by an agent with decreasing absolute prudence is larger than the optimal effort chosen by a risk-neutral agent if the degree of absolute prudence is less than a threshold that is utility-independent and empirically verifiable.

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Year of publication:	2011
Authors:	Dionne, Georges ; Li, Jingyuan
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 113.2011, 2, p. 147-149
Publisher:	Elsevier
Subject:	Absolute prudence \| Self-protection \| Skewness

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Type of publication:	Article
Classification:	D61 - Allocative Efficiency; Cost-Benefit Analysis ; D81 - Criteria for Decision-Making under Risk and Uncertainty
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010572254