IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v257y2025ics0165176525005087.html

Prudence and prevention – empirical evidence

Author

Listed:
  • Mayrhofer, Thomas
  • Schmitz, Hendrik

Abstract

Theory shows that optimal prevention decisions in the sense of self-protection (i. e., primary prevention) depend not only on the level of (second-order) risk aversion but also on prudence (third-order risk aversion). We use a unique dataset that combines data on higher-order risk preferences and observed real-world preventive behavior and provide the first representative evidence of a negative relationship between prudence and self-protection: We find that prudent individuals in the high-risk group (above the age of 60 or chronically ill) indeed invest less in self-protection as measured by influenza vaccination. This does not hold for younger and healthy individuals for whom influenza vaccination rates are low in general.

Suggested Citation

  • Mayrhofer, Thomas & Schmitz, Hendrik, 2025. "Prudence and prevention – empirical evidence," Economics Letters, Elsevier, vol. 257(C).
    • Handle: RePEc:eee:ecolet:v:257:y:2025:i:c:s0165176525005087
    DOI: 10.1016/j.econlet.2025.112671
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176525005087
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2025.112671?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. EECKHOUDT, Louis, 2012. "Beyond risk aversion: why, how and what's next?," LIDAM Reprints CORE 2514, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Cary Deck & Harris Schlesinger, 2010. "Exploring Higher Order Risk Effects," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(4), pages 1403-1420.
    3. Miriam Krieger & Thomas Mayrhofer, 2012. "Patient Preferences and Treatment Thresholds under Diagnostic Risk – An Economic Laboratory Experiment," Ruhr Economic Papers 0321, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    4. Miriam Krieger & Thomas Mayrhofer, 2017. "Prudence and prevention: an economic laboratory experiment," Applied Economics Letters, Taylor & Francis Journals, vol. 24(1), pages 19-24, January.
    5. Attema, Arthur E. & l’Haridon, Olivier & van de Kuilen, Gijs, 2019. "Measuring multivariate risk preferences in the health domain," Journal of Health Economics, Elsevier, vol. 64(C), pages 15-24.
    6. A. Sandmo, 1970. "The Effect of Uncertainty on Saving Decisions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 37(3), pages 353-360.
    7. Takehito Masuda & Eungik Lee, 2019. "Higher order risk attitudes and prevention under different timings of loss," Experimental Economics, Springer;Economic Science Association, vol. 22(1), pages 197-215, March.
    8. Cary Deck & Harris Schlesinger, 2014. "Consistency of Higher Order Risk Preferences," Econometrica, Econometric Society, vol. 82, pages 1913-1943, September.
    9. Sebastian Ebert & Daniel Wiesen, 2011. "Testing for Prudence and Skewness Seeking," Management Science, INFORMS, vol. 57(7), pages 1334-1349, July.
    10. Richard Peter, 2021. "A fresh look at primary prevention for health risks," Health Economics, John Wiley & Sons, Ltd., vol. 30(5), pages 1247-1254, May.
    11. Charles N. Noussair & Stefan T. Trautmann & Gijs van de Kuilen, 2014. "Higher Order Risk Attitudes, Demographics, and Financial Decisions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(1), pages 325-355.
    12. Peter, Richard, 2017. "Optimal self-protection in two periods: On the role of endogenous saving," Journal of Economic Behavior & Organization, Elsevier, vol. 137(C), pages 19-36.
    13. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2011. "Individual Risk Attitudes: Measurement, Determinants, And Behavioral Consequences," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 522-550, June.
    14. Dionne, Georges & Eeckhoudt, Louis, 1985. "Self-insurance, self-protection and increased risk aversion," Economics Letters, Elsevier, vol. 17(1-2), pages 39-42.
    15. Caballe, Jordi & Pomansky, Alexey, 1996. "Mixed Risk Aversion," Journal of Economic Theory, Elsevier, vol. 71(2), pages 485-513, November.
    16. Patrick L. Brockett & Linda L. Golden, 1987. "A Class of Utility Functions Containing all the Common Utility Functions," Management Science, INFORMS, vol. 33(8), pages 955-964, August.
    17. Menegatti, Mario & Rebessi, Filippo, 2011. "On the substitution between saving and prevention," Mathematical Social Sciences, Elsevier, vol. 62(3), pages 176-182.
    18. Menezes, C & Geiss, C & Tressler, J, 1980. "Increasing Downside Risk," American Economic Review, American Economic Association, vol. 70(5), pages 921-932, December.
    19. Sebastian Ebert & Daniel Wiesen, 2014. "Joint measurement of risk aversion, prudence, and temperance," Journal of Risk and Uncertainty, Springer, vol. 48(3), pages 231-252, June.
    20. Cary Deck & Harris Schlesinger, 2018. "On The Robustness Of Higher Order Risk Preferences," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 85(2), pages 313-333, June.
    21. Christophe Courbage & Béatrice Rey, 2006. "Prudence and optimal prevention for health risks," Post-Print halshs-03353388, HAL.
    22. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-648, July-Aug..
    23. Louis Eeckhoudt, 2012. "Beyond Risk Aversion: Why, How and What's Next?*," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 37(2), pages 141-155, September.
    24. Trautmann, Stefan T. & Kuilen, Gijs van de, 2018. "Higher order risk attitudes: A review of experimental evidence," European Economic Review, Elsevier, vol. 103(C), pages 108-124.
    25. Christophe Courbage & Béatrice Rey, 2006. "Prudence and optimal prevention for health risks," Health Economics, John Wiley & Sons, Ltd., vol. 15(12), pages 1323-1327, December.
    26. Timo Heinrich & Thomas Mayrhofer, 2018. "Higher-order risk preferences in social settings," Experimental Economics, Springer;Economic Science Association, vol. 21(2), pages 434-456, June.
    27. Haering, Alexander & Heinrich, Timo & Mayrhofer, Thomas, 2017. "Exploring the consistency of higher-order risk preferences," Ruhr Economic Papers 688, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    28. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
    29. Annette Hofmann & Richard Peter, 2016. "Self-Insurance, Self-Protection, and Saving: On Consumption Smoothing and Risk Management," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(3), pages 719-734, September.
    30. Decker, Simon & Schmitz, Hendrik, 2016. "Health shocks and risk aversion," Journal of Health Economics, Elsevier, vol. 50(C), pages 156-170.
    31. Gretchen B. Chapman & Elliot J. Coups, 1999. "Time Preferences and Preventive Health Behavior," Medical Decision Making, , vol. 19(3), pages 307-314, August.
    32. Krieger, Miriam & Mayrhofer, Thomas, 2012. "Patient Preferences and Treatment Thresholds under Diagnostic Risk – An Economic Laboratory Experiment," Ruhr Economic Papers 321, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    33. Eeckhoudt, Louis & Gollier, Christian & Schlesinger, Harris, 1996. "Changes in Background Risk and Risk-Taking Behavior," Econometrica, Econometric Society, vol. 64(3), pages 683-689, May.
    34. Hayne E. Leland, 1968. "Saving and Uncertainty: The Precautionary Demand for Saving," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 82(3), pages 465-473.
    35. Richard Peter, 2021. "Who should exert more effort? Risk aversion, downside risk aversion and optimal prevention," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(4), pages 1259-1281, June.
    36. Heinrich, Timo & Mayrhofer, Thomas, 2014. "Higher-order Risk Preferences in Social Settings - An Experimental Analysis," Ruhr Economic Papers 508, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    37. Louis Eeckhoudt & Harris Schlesinger, 2006. "Putting Risk in Its Proper Place," American Economic Review, American Economic Association, vol. 96(1), pages 280-289, March.
    38. Louis Eeckhoudt & Christian Gollier, 2005. "The impact of prudence on optimal prevention," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(4), pages 989-994, November.
    39. Alexander Haering & Timo Heinrich & Thomas Mayrhofer, 2020. "Exploring The Consistency Of Higher Order Risk Preferences," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(1), pages 283-320, February.
    40. Timo Heinrich & Jason Shachat, 2020. "The development of risk aversion and prudence in Chinese children and adolescents," Journal of Risk and Uncertainty, Springer, vol. 61(3), pages 263-287, December.
    41. Stefan Felder & Thomas Mayrhofer, 2017. "Medical Decision Making," Springer Books, Springer, edition 2, number 978-3-662-53432-8, October.
    42. Eeckhoudt, Louis & Gollier, Christian & Schneider, Thierry, 1995. "Risk-aversion, prudence and temperance: A unified approach," Economics Letters, Elsevier, vol. 48(3-4), pages 331-336, June.
    43. Hendrik Schmitz & Ansgar Wübker, 2011. "What determines influenza vaccination take‐up of elderly Europeans?," Health Economics, John Wiley & Sons, Ltd., vol. 20(11), pages 1281-1297, November.
    44. Menegatti, Mario, 2009. "Optimal prevention and prudence in a two-period model," Mathematical Social Sciences, Elsevier, vol. 58(3), pages 393-397, November.
    45. Felder, Stefan & Mayrhofer, Thomas, 2011. "Higher-Order Risk Preferences – Consequences for Test and Treatment Thresholds and Optimal Cutoffs," Ruhr Economic Papers 287, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. is not listed on IDEAS
    2. Irene Mussio & Maximiliano Sosa Andrés & Abdul H Kidwai, 2023. "Higher order risk attitudes in the time of COVID-19: an experimental study," Oxford Economic Papers, Oxford University Press, vol. 75(1), pages 163-182.
    3. Liudong Chen & Bolun Xu, 2024. "A Prudent Framework for Understanding Risk-Awareness in Demand Response," Papers 2405.16356, arXiv.org, revised May 2025.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Schneider, Sebastian O. & Sutter, Matthias, 2020. "Higher Order Risk Preferences: Experimental Measures, Determinants and Related Field Behavior," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224643, Verein für Socialpolitik / German Economic Association.
    2. Timo Heinrich & Jason Shachat, 2020. "The development of risk aversion and prudence in Chinese children and adolescents," Journal of Risk and Uncertainty, Springer, vol. 61(3), pages 263-287, December.
    3. Timo Heinrich & Thomas Mayrhofer, 2018. "Higher-order risk preferences in social settings," Experimental Economics, Springer;Economic Science Association, vol. 21(2), pages 434-456, June.
    4. Richard Peter, 2024. "The economics of self-protection," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 49(1), pages 6-35, March.
    5. Irene Mussio & Maximiliano Sosa Andrés & Abdul H Kidwai, 2023. "Higher order risk attitudes in the time of COVID-19: an experimental study," Oxford Economic Papers, Oxford University Press, vol. 75(1), pages 163-182.
    6. Takehito Masuda & Eungik Lee, 2019. "Higher order risk attitudes and prevention under different timings of loss," Experimental Economics, Springer;Economic Science Association, vol. 22(1), pages 197-215, March.
    7. Trautmann, Stefan T. & Kuilen, Gijs van de, 2018. "Higher order risk attitudes: A review of experimental evidence," European Economic Review, Elsevier, vol. 103(C), pages 108-124.
    8. Heinrich, Timo & Mayrhofer, Thomas, 2014. "Higher-order Risk Preferences in Social Settings - An Experimental Analysis," Ruhr Economic Papers 508, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    9. Timo Heinrich & Thomas Mayrhofer, 2014. "Higher-order Risk Preferences in Social Settings - An Experimental Analysis," Ruhr Economic Papers 0508, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    10. Han Bleichrodt, 2022. "The prevention puzzle," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 47(2), pages 277-297, September.
    11. Liqun Liu & William S. Neilson, 2019. "Alternative Approaches to Comparative n th-Degree Risk Aversion," Management Science, INFORMS, vol. 65(8), pages 3824-3834, August.
    12. Brunette, Marielle & Jacob, Julien, 2019. "Risk aversion, prudence and temperance: An experiment in gain and loss," Research in Economics, Elsevier, vol. 73(2), pages 174-189.
    13. Han (H.) Bleichrodt & Paul van Bruggen, 2018. "Reflection for higher order risk preferences," Tinbergen Institute Discussion Papers 18-079/I, Tinbergen Institute.
    14. Camille Cornand & Maria Alejandra Erazo Diaz & Béatrice Rey & Adam Zylbersztejn, 2023. "On the robustness of higher order attitudes to ambiguity framing," Working Papers hal-04316734, HAL.
    15. Colasante, Annarita & Riccetti, Luca, 2020. "Risk aversion, prudence and temperance: It is a matter of gap between moments," Journal of Behavioral and Experimental Finance, Elsevier, vol. 25(C).
    16. Colasante, Annarita & Riccetti, Luca, 2021. "Financial and non-financial risk attitudes: What does it matter?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    17. Attema, Arthur E. & l’Haridon, Olivier & van de Kuilen, Gijs, 2019. "Measuring multivariate risk preferences in the health domain," Journal of Health Economics, Elsevier, vol. 64(C), pages 15-24.
    18. Heinzel Christoph & Richard Peter, 2021. "Precautionary motives with multiple instruments," Working Papers SMART 21-09, INRAE UMR SMART.
    19. Peter, Richard & Hofmann, Annette, 2024. "Precautionary risk-reduction and saving decisions: Two sides of the same coin?," Insurance: Mathematics and Economics, Elsevier, vol. 118(C), pages 175-194.
    20. Haering, Alexander, 2021. "Framing decisions in experiments on higher-order risk preferences," Ruhr Economic Papers 913, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:257:y:2025:i:c:s0165176525005087. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.