The Comparative Statics of Self-Protection ABSTRACT

This article considers the effects of changes in initial wealth and loss size on optimal self-protection (loss prevention) activity in a simple model of self-protection choice. The effect of an initial wealth increase is shown to depend on both the probability of a loss and characteristics of the ag...

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Bibliographic Details
Published inThe Journal of risk and insurance Vol. 59; no. 2; p. 301
Main Authors Sweeney, George H, Beard, T Randolph
Format Journal Article
LanguageEnglish
Published Malvern Blackwell Publishing Ltd 01.06.1992
Subjects
Expected utility
Expenditures
Probability
Utility functions
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Summary:This article considers the effects of changes in initial wealth and loss size on optimal self-protection (loss prevention) activity in a simple model of self-protection choice. The effect of an initial wealth increase is shown to depend on both the probability of a loss and characteristics of the agent's absolute risk-aversion function, while increases in the size of the potential loss are shown to lead to increased self-protection under a variety of plausible restrictions on risk preference. A set of sufficient conditions for signing comparative static results are obtained.
ISSN:0022-4367
1539-6975