Precautionary effort : another trait for prudence
Journal of Risk and Insurance
Wiley-Blackwell Publishing, Inc.
Prudence, Precautionary effort, Background risks
This paper shows that, in the temporal model of Eeckhoudt et al. (2012), prudence alone is sufficient to obtain a precautionary effort. Moreover, our conclusions relax the assumption of the convexity of loss probability. We further analyze the effect of the introduction or deterioration of background risks on precautionary effort in different settings.
This work is supported by the Fundamental Research Funds for the Central Universities under Research Project No. NR2014002, the Faculty Research Grant of Lingnan University under Research Project No. DR12A9, and Direct Grant for Research of Lingnan University under ResearchProject No. DR13C8.
Copyright © The Journal of Risk and Insurance, 2014
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Wang, J., & Li, J. (2014). Precautionary effort: Another trait for prudence. Journal of Risk and Insurance, 82(4), 977-983. doi: 10.1111/jori.12054