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The Problem of Prevention

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  • Juan Dubra

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  • Jean-Pierre Benoit

Abstract

Many disasters are foreshadowed by insuficient preventive care. In this paper, we argue that there is a true problem of prevention, in that insu¢ cient care is often the result of rational calculations on the part of agents. We identify two factors that lead to dubious e¤orts in care. First, when objective risks of a disaster are poorly understood, positive experiences may lead to an underestimation of these risks and a corresponding underinvestment in prevention. Second, redundancies designed for safety may lead agents to reduce their care, resulting in a decrease in safety under certain conditions. We also analyze the use of checklists in accident prevention

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Bibliographic Info

Paper provided by Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo. in its series Documentos de Trabajo/Working Papers with number 1111.

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Date of creation: 2011
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Handle: RePEc:mnt:wpaper:1111

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Postal: Prudencio de Pena 2440, Montevideo 11600
Web page: http://www.um.edu.uy/cee/
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Keywords: Overconfidence; Better than Average; Experimental Economics; Irrationality; Signalling Models;

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  1. Dewatripont, Mathias & Jewitt, Ian & Tirole, Jean, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 183-98, January.
  2. Dasgupta, Amil & Prat, Andrea, 2005. "Asset Price Dynamics When Traders Care About Reputation," CEPR Discussion Papers 5372, C.E.P.R. Discussion Papers.
  3. Marco Ottaviani & Peter Sorensen, 1999. "Professional Advice," Game Theory and Information 9906003, EconWPA.
  4. Bengt Holmstrom, 1999. "Managerial Incentive Problems: A Dynamic Perspective," NBER Working Papers 6875, National Bureau of Economic Research, Inc.
  5. Dubra, J., 1999. "Overconfidence in Search," Working Papers 99-10, C.V. Starr Center for Applied Economics, New York University.
  6. Scharfstein, David. & Stein, Jeremy C., 1988. "Herd behavior and investment," Working papers WP 2062-88., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  7. Gaube, Thomas, 2001. "Group size and free riding when private and public goods are gross substitutes," Economics Letters, Elsevier, vol. 70(1), pages 127-132, January.
  8. Cornes, Richard, 1993. "Dyke Maintenance and Other Stories: Some Neglected Types of Public Goods," The Quarterly Journal of Economics, MIT Press, vol. 108(1), pages 259-71, February.
  9. Juan Dubra, 2004. "Optimism and Overconfidence in Search," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 198-218, January.
  10. Glenn MacDonald & Leslie M. Marx, 2001. "Adverse Specialization," Journal of Political Economy, University of Chicago Press, vol. 109(4), pages 864-899, August.
  11. Rothschild, Michael, 1974. "Searching for the Lowest Price When the Distribution of Prices Is Unknown," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 689-711, July/Aug..
  12. Gollier, Christian, 2002. "Optimal Prevention of Unknown Risks: A Dynamic Approach with Learning," IDEI Working Papers 139, Institut d'Économie Industrielle (IDEI), Toulouse.
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