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 |
Funding
The authors would like to thank the editor and anonymous referees for providing valuable suggestions which have led to significant improvement of this article. This work is supported by the National Natural Science Foundation of China under Grant Number 71401074 , MOE (Ministry of Education in China) Project of Humanities and Social Sciences under Grant Number 19YJC790125 , and by the Fundamental Research Funds for the Central Universities under Research Project No. NS2018049.
Keywords
- Expected-utility
- Intertemporal substitution
- Risk aversion
- Self-protection
- Stochastic dominance