Should More Risk-Averse Agents Exert More Effort?

Bruno Jullien, Bernard Salanié and François Salanié
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Bernard Salanié: CREST-LEI, INSEE, Paris
François Salanié: ERNA-INRA, Toulouse
Authors registered in the RePEc Author Service: François Salanié and Bernard Salanié

The Geneva Risk and Insurance Review, 1999, vol. 24, issue 1, 19-28

Abstract: Consider an agent facing a risky distribution of losses who can change this distribution by exerting some effort. Should he exert more effort when he becomes more risk-averse? For instance, should we expect more risk-averse drivers to drive more cautiously? In this article, we give sufficient conditions under which the answer is positive, using results presented in Jewitt (1989). We first extend the standard models of self-insurance and self-protection and show that the comparative statics depends only on the effect of effort on the net loss. We then present conditions for the continuous case with applications. The Geneva Papers on Risk and Insurance Theory (1999) 24, 19–28. doi:10.1023/A:1008729115022

Date: 1999
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Related works:
Working Paper: Should More Risk-Averse Agents Exert More Effort (1998)
Working Paper: Should More Risk-Averse Agents Exert More Effort? (1998)
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