This paper re-examines the link between absolute prudence and self-protection activities. We show that the level of effort chosen by a prudent agent is larger than the optimal effort chosen by a risk-neutral agent if and only if the degree of absolute prudence is less than a threshold that is...

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...