This paper analyzes optimal prevention in a situation of multiple, possibly correlated risks. We focus on probability reduction (self-protection) so that correlation becomes endogenous. If prevention concerns only one risk, introducing a second exogenous risk increases the level of prevention...

This paper studies the effect of increased risk aversion on self-insurance and self-protection in a two-period framework. Here risk management incentives and consumption smoothing incentives are traded off, and the monotonic relationship between self-insurance and risk aversion may no longer...