We analyze how loss aversion affects prevention in Köszegi and Rabin's (2007) choice-acclimating personal equilibrium. Individuals take into account the financial consequences of prevention but also expected sensations of disappointment or elation against a stochastic reference point. Loss...

This paper studies the effect of increased risk aversion on self-insurance and self-protection in a two-period expected utility framework in which the risk-reducing investment precedes its effect. In contrast to monoperiodic models, self-insurance and self-protection react very similarly to an...

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...