Optimal prevention and prudence in a two-period model

Mario Menegatti

No 2008-EP03, Economics Department Working Papers from Department of Economics, Parma University (Italy)

Abstract: This work shows that in a two-period framework, prudence has an increasing effect on optimal prevention. This conclusion is the opposite to that obtained in a one-period framework [Eeckhoudt and Gollier, Economic Theory 26 (2005), 989-994]. This is due to the opposite effect of prevention on wealth in the period where the risk occurs.

Keywords: Prevention; Prudence (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2008
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Persistent link: http://EconPapers.repec.org/RePEc:par:dipeco:2008-ep03

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