Benoît Sévi () (LASER-CREDEN Université de Montpellier) Fabrice Yafil () (LAMETA Université de Montpellier)
Abstract
Considering self-protection, it is a well-known result that an increase in risk aversion does not unambiguously lead to a higher level of effort. In this paper, we consider a particular case of self-protection, the choice of a lawyer, assuming a positive relation between legal expenses and probability of success. In this context, level of effort is strictly monotone in risk aversion. We show that, paradoxically, the level of effort is not systematically higher for an indemnified more risk-averse agent than for a non-indemnified less risk-averse agent.
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Publisher Info
Article provided by Economics Bulletin in its journal Economics Bulletin.
Find related papers by JEL classification: D8 - Microeconomics - - Information, Knowledge, and Uncertainty
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