The prevention puzzle

Han Bleichrodt

The Geneva Risk and Insurance Review, 2022, vol. 47, issue 2, No 1, 277-297

Abstract: Abstract Promoting prevention is an important goal of public policy. Fifty years ago, Ehrlich and Becker (J Polit Econ 80:623–648, 1972) proposed a simple model of prevention (or self-protection as they called it). Surprisingly enough, subsequent research, mainly within the expected utility paradigm, showed that it is hard to derive clear predictions within this simple model that can help to guide policy. This is what I refer to as the prevention puzzle: why is it so hard for economic theory to guide prevention decisions? In this article I try to shed light on this question. I review the existing literature and add some tentative new results under nonexpected utility. While the impact of risk aversion on prevention is complex, three factors seem to contribute unambiguously to underprevention: prudence, likelihood insensitivity, and loss aversion. I conclude by giving some ideas how empirical research may contribute to the understanding of prevention decisions and help to solve the prevention puzzle.

Keywords: D81; I12; I18; Prevention puzzle; Risk attitude; Prudence; Probability weighting; Loss aversion (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1057/s10713-022-00079-6 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:genrir:v:47:y:2022:i:2:d:10.1057_s10713-022-00079-6

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10713

DOI: 10.1057/s10713-022-00079-6

Access Statistics for this article

The Geneva Risk and Insurance Review is currently edited by Michael Hoy and Nicolas Treich

More articles in The Geneva Risk and Insurance Review from Palgrave Macmillan, International Association for the Study of Insurance Economics (The Geneva Association) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().