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Prudence and Different Kinds of Prevention

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  • Mario Menegatti

    (Universitá di Parma)

Abstract

This paper examines the effect of prudence on the optimal choices of advance and contemporaneous prevention in a context where the two kinds of prevention are used together. We show that, under some conditions on the probability of loss occurrence, prudence tends to increase advance prevention and to reduce contemporaneous prevention, while imprudence tends to do the opposite. Further results on the effect of prudence/imprudence on agents’ optimal behavior are provided.

Suggested Citation

  • Mario Menegatti, 2018. "Prudence and Different Kinds of Prevention," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 44(2), pages 273-285, April.
    • Handle: RePEc:pal:easeco:v:44:y:2018:i:2:d:10.1057_s41302-016-0081-y
    DOI: 10.1057/s41302-016-0081-y
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    References listed on IDEAS

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    Cited by:

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    2. Liqun Liu & Andrew J. Rettenmaier & Thomas R. Saving, 2019. "Staying the Course or Rolling the Dice: Time Horizon’s Effect on the Propensity to Take Risk," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 42(1), pages 66-85.

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