How do changes in risk and risk aversion affect self-protection with Selden/Kreps–Porteus preferences?

Jianli WANG, Hongxia WANG, Ho Yin YICK

Research output: Journal Publications › Journal Article (refereed) › peer-review

Abstract

This paper examines the determinants of optimal effort in an intertemporal self-protection model. We separate attitude toward risk and attitude toward intertemporal substitution by adopting Selden/Kreps–Porteus preferences. We not only explore the sufficient conditions on risk preferences for guaranteeing the unambiguous effects of changes in risk on the optimal effort level but also show how a change in risk aversion alone affects the optimal effort level.
Original languageEnglish
Pages (from-to)1-6
Number of pages6
JournalInsurance: Mathematics and Economics
Volume88
Early online date27 May 2019
DOIs
Publication statusPublished - 1 Sep 2019

Keywords

  • Expected-utility
  • Intertemporal substitution
  • Risk aversion
  • Self-protection
  • Stochastic dominance

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