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Risk, Self-Protection, and Ex Ante Economic Value


  • Jason F. Shogren
  • Thomas D. Crocker


We develop three propositions about the ex ante value of reduced risk. If there is a continuous outcome distribution and if self-protection influences outcome probability and severity, then: (1) unobservable utility terms cannot be eliminated from the ex ante value expressions; (2) knowledge of the convexity or the nonconvexity of dose-response functions is insufficient to sign changes in these expressions; and (3) self-protection expenditures need not be a lower bound measure of these expressions. Therefore, many restrictions applied in recent empirical work on the economic value of risk changes are not immediately transferable to settings where endogenous risks prevail.

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  • Jason F. Shogren & Thomas D. Crocker, 1990. "Risk, Self-Protection, and Ex Ante Economic Value," Center for Agricultural and Rural Development (CARD) Publications 90-wp57, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  • Handle: RePEc:ias:cpaper:90-wp57

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    1. Cote, Agathe, 1987. "The Link between the U.S. Dollar Real Exchange Rate, Real Primary Commodity Prices, and LDCs' Terms of Trade," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 547-551, August.
    2. Jeffrey D. Sachs, 1985. "External Debt and Macroeconomic Performance in Latin America and East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(2), pages 523-573.
    3. Rudiger Dornbusch, 1985. "Policy and Performance Links between LDC Debtors and Industrial Nations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(2), pages 303-368.
    4. Gilbert, Christopher L, 1989. "The Impact of Exchange Rates and Developing Country Debt on Commodity Prices," Economic Journal, Royal Economic Society, vol. 99(397), pages 773-784, September.
    5. Valdés, Alberto & Zietz, Joachim A., 1980. "Agricultural protection in OECD countries: its cost to less-developed countries," Research reports 21, International Food Policy Research Institute (IFPRI).
    6. E. C. Hwa, 1979. "Price Determination in Several International Primary Commodity Markets: A Structural Analysis (La détermination des prix sur plusieurs marchés internationaux de produits primaires de base: Analyse s," IMF Staff Papers, Palgrave Macmillan, vol. 26(1), pages 157-188, March.
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