Prudence and prevention: an economic laboratory experiment

In an economic laboratory experiment, we study the relationship between prudence and prevention in general decision situations. Previous theoretical research on this relationship posits a negative impact of prudence on the optimal level of prevention. Overall, we find both risk-averse and prudent be...

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Bibliographic Details
Published inApplied economics letters Vol. 24; no. 1; pp. 19 - 24
Main Authors Krieger, Miriam, Mayrhofer, Thomas
Format Journal Article
LanguageEnglish
Published London Routledge 01.01.2017
Taylor & Francis LLC
Subjects
Economic analysis
Economic models
Experiments
Laboratories
laboratory experiment
Prevention
prudence
Risk
risk preferences
Self-protection
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ISSN1350-4851
1466-4291
DOI10.1080/13504851.2016.1158909

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Summary:In an economic laboratory experiment, we study the relationship between prudence and prevention in general decision situations. Previous theoretical research on this relationship posits a negative impact of prudence on the optimal level of prevention. Overall, we find both risk-averse and prudent behaviour among our subjects. Moreover, prudent subjects chose significantly less prevention than nonprudent subjects, confirming the theoretical results of one-period models in the literature. Our findings might have implications for health policy if prudence - rather than irrational decision behaviour, as previously assumed - is responsible for low levels of preventive effort.
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ISSN:1350-4851
1466-4291
DOI:10.1080/13504851.2016.1158909