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 language | English |
|---|---|
| Pages (from-to) | 1-6 |
| Number of pages | 6 |
| Journal | Insurance: Mathematics and Economics |
| Volume | 88 |
| Early online date | 27 May 2019 |
| DOIs | |
| Publication status | Published - 1 Sept 2019 |
Keywords
- Expected-utility
- Intertemporal substitution
- Risk aversion
- Self-protection
- Stochastic dominance