We study the consequences of introducing random costs (as opposed to certain costs) on the propensity to implement self-protection actions, i.e. actions reducing the probability of a loss. Our analysis is performed in four standard self-protection frameworks: (1) the one-period model in which the cost and benefit occur at the same period of time; (2) a variation of this one-period model where wealth in each state of nature is a random variable; (3) the one-period model where the cost of the self-protection action is only paid in the absence of loss; (4) the two-period model in which the cost of self-protection precedes its benefit. For each of these models we provide a set of conditions ensuring clear-cut effects to occur and a specific interpretation for each of them.

Self-protection with random costs / Crainich, D.; Menegatti, M.. - In: INSURANCE MATHEMATICS & ECONOMICS. - ISSN 0167-6687. - 98:(2021), pp. 63-67. [10.1016/j.insmatheco.2021.02.006]

Self-protection with random costs

Menegatti M.
2021-01-01

Abstract

We study the consequences of introducing random costs (as opposed to certain costs) on the propensity to implement self-protection actions, i.e. actions reducing the probability of a loss. Our analysis is performed in four standard self-protection frameworks: (1) the one-period model in which the cost and benefit occur at the same period of time; (2) a variation of this one-period model where wealth in each state of nature is a random variable; (3) the one-period model where the cost of the self-protection action is only paid in the absence of loss; (4) the two-period model in which the cost of self-protection precedes its benefit. For each of these models we provide a set of conditions ensuring clear-cut effects to occur and a specific interpretation for each of them.
Self-protection with random costs / Crainich, D.; Menegatti, M.. - In: INSURANCE MATHEMATICS & ECONOMICS. - ISSN 0167-6687. - 98:(2021), pp. 63-67. [10.1016/j.insmatheco.2021.02.006]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11381/2920864
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