Prudence and prevention: an economic laboratory experiment

Miriam Krieger and Thomas Mayrhofer

Applied Economics Letters, 2017, vol. 24, issue 1, 19-24

Abstract: 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.

Date: 2017
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DOI: 10.1080/13504851.2016.1158909

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