Title

Precautionary effort : another trait for prudence

Document Type

Journal article

Source Publication

Journal of Risk and Insurance

Publication Date

12-2015

Volume

82

Issue

4

First Page

977

Last Page

983

Publisher

Wiley-Blackwell Publishing, Inc.

Keywords

Prudence, Precautionary effort, Background risks

Abstract

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.

DOI

10.1111/jori.12054

Print ISSN

00224367

E-ISSN

15396975

Funding Information

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.

Publisher Statement

Copyright © The Journal of Risk and Insurance, 2014

Access to external full text or publisher's version may require subscription.

Additional Information

This paper is also available at Social Science Research Network at http://ssrn.com/abstract=2445785

Full-text Version

Publisher’s Version

Recommended Citation

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