Essential aspects regarding the optimal prevention

Constantin Anghelache, Mario G.R. Pagliacci, Emilia Stanciu and Sacala Cristina ()
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Constantin Anghelache: Bucharest University of Economic Studies
Mario G.R. Pagliacci: Universita degli Studi di Perugia
Emilia Stanciu: Bucharest University of Economic Studies

Romanian Statistical Review Supplement, 2016, vol. 64, issue 1, 38-42

Abstract: It is recurrently very likely for decision-makers to wrongly assess risk and consequently to ineffectively put effort in diminishing or avoiding it. Preventing losses or self-protection represent an effort we make in order to reduce the impact of a probable accident. The question is: what would be the level that maximizes the estimated utility of an economic agent? In many cases, the cost-benefit an analysis of prevention is analyzed based on the risk-neutrality assumption. This means that only losses of average size matter. There is no intention of reducing the variability of losses if it doesn’t involve a loss above average. The extreme measure of risk prevention is giving up any type of risk.

Keywords: prevention; assets; risk; aversion; optimization (search for similar items in EconPapers)
Date: 2016
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