The impact of prudence on optimal prevention revisited

Georges DIONNE, Jingyuan LI

Research output: Journal PublicationsJournal Article (refereed)

21 Citations (Scopus)

Abstract

We re-examine the link between absolute prudence and self-protection activities. We show that the level of effort chosen by an agent with decreasing absolute prudence is larger than the optimal effort chosen by a risk-neutral agent if the degree of absolute prudence is less than a threshold that is utility-independent and empirically verifiable.
Original languageEnglish
Pages (from-to)147-149
Number of pages3
JournalEconomics Letters
Volume113
Issue number2
DOIs
Publication statusPublished - 1 Nov 2011

Bibliographical note

This paper is also available at the Social Science Research Network at http://ssrn.com/abstract=1639539.

Keywords

  • Skewness
  • absolute prudence
  • self-protection

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