Self-insurance, self-protection, and increased risk aversion: An intertemporal reinvestigation

Annette Hofmann and Richard Peter

No 26, Working Papers on Risk and Insurance from University of Hamburg, Institute for Risk and Insurance

Abstract: This paper studies the effect of increased risk aversion on self-insurance and self-protection in a two-period framework. Here risk management incentives and consumption smoothing incentives are traded off, and the monotonic relationship between self-insurance and risk aversion may no longer hold as more risk-averse agents cannot always afford spending more on self-insurance. A very similar relationship holds for self-protection making self-insurance and self-protection much more alike in a two-period model. We also extend the model to a joint analysis of self-insurance/self-protection and saving decisions.

Keywords: self-insurance; self-protection; risk aversion; time structure (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:hzvwps:26

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