Background risk and the value of a monetary risk

Beatrice Rey () and Laurence Abadie ()

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Abstract: A large literature about the analysis of risk prevention behavior has been developed this last few years. Concerning the benefit of prevention (for a single agent or for the collectivity), it is usually necessary to evaluate the agent's willingness to pay (WTP) for a risk elimination or at least a risk reduction. Since Ehrlich and Becker [ 1972 ], theoretical and empirical studies are abundant in the literature concerning the WTP to reduce a ...nancial risk (Chiu [ 1998 ], Godfroid [ 1999 ]) or a physical risk when this risk exists in an isolated way (Drèze [ 1962 ], Viscusi [ 1993 ]). But typically, agents do not face a single isolated risk but several risks at the same time . And the interaction impact between risks on the agents' prevention behavior must not be neglected . Whereas some studies in a multirisks context exist (Bleichrodt and alii [ 2002 ]), few authors are dealing with the case of di¤erent nature risks (Eeckhoudt and Hammit [ 2001 ]).

Keywords: risk prevention; risk reduction (search for similar items in EconPapers)
Date: 2004
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Published in 31st seminar EGRIE European Group of Risk and Insurance Economists (EGRIE), 2004, Marseille, France

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00363490

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