This work shows that in a two-period framework, prudence has an increasing effect on optimal prevention. This conclusion is the opposite to that obtained in a one-period framework [Eeckhoudt and Gollier, Economic Theory 26 (2005), 989-994]. This is due to the opposite effect of prevention on wealth in the period where the risk occurs.
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Paper provided by Department of Economics, Parma University (Italy) in its series Economics Department Working Papers with number
2008-EP03.
Find related papers by JEL classification: D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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