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.
Optimal prevention and prudence in a two-period model / Menegatti, Mario. - In: MATHEMATICAL SOCIAL SCIENCES. - ISSN 0165-4896. - 58:(2009), pp. 393-397. [10.1016/j.mathsocsci.2009.07.001]
Optimal prevention and prudence in a two-period model
MENEGATTI, Mario
2009-01-01
Abstract
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.File in questo prodotto:
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