Optimal prevention and prudence in a two-period model

Optimal prevention and prudence in a two-period model

This work shows that, in a two-period framework, prudence has a positive effect on optimal prevention. This conclusion is the opposite to that obtained in a one-period framework [Eeckhoudt L., Gollier C., 2005. The impact of prudence on optimal prevention. Economic Theory 26, 989–994]. This is due t...

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Veröffentlicht in:Mathematical social sciences 2009-11, Vol.58 (3), p.393-397
1. Verfasser: Menegatti, Mario
Format: Artikel
Sprache:eng
Schlagworte:
Mathematical methods
Prevention
Prevention Prudence Risk
Prudence
Risk
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Zusammenfassung:This work shows that, in a two-period framework, prudence has a positive effect on optimal prevention. This conclusion is the opposite to that obtained in a one-period framework [Eeckhoudt L., Gollier C., 2005. The impact of prudence on optimal prevention. Economic Theory 26, 989–994]. This is due to the opposite effect of prevention on wealth in the period where the risk occurs.
ISSN:0165-4896
1879-3118
DOI:10.1016/j.mathsocsci.2009.07.001