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Background risk and self-protection

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  • Lee, Kangoh

Abstract

The presence of background risk increases self-protection effort or caution as long as an agent is prudent. In addition, the result extends to monetary self-protection investment if wealth and consumption are complements.

Suggested Citation

  • Lee, Kangoh, 2012. "Background risk and self-protection," Economics Letters, Elsevier, vol. 114(3), pages 262-264.
    • Handle: RePEc:eee:ecolet:v:114:y:2012:i:3:p:262-264
    DOI: 10.1016/j.econlet.2011.10.018
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    References listed on IDEAS

    as
    1. Kimball, Miles S, 1993. "Standard Risk Aversion," Econometrica, Econometric Society, vol. 61(3), pages 589-611, May.
    2. Lee, Kangoh, 1998. "Risk Aversion and Self-Insurance-cum-Protection," Journal of Risk and Uncertainty, Springer, vol. 17(2), pages 139-150, November.
    3. Doherty, Neil A & Schlesinger, Harris, 1983. "Optimal Insurance in Incomplete Markets," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 1045-1054, December.
    4. Dionne, Georges & Eeckhoudt, Louis, 1985. "Self-insurance, self-protection and increased risk aversion," Economics Letters, Elsevier, vol. 17(1-2), pages 39-42.
    5. Kihlstrom, Richard E & Romer, David & Williams, Steve, 1981. "Risk Aversion with Random Initial Wealth," Econometrica, Econometric Society, vol. 49(4), pages 911-920, June.
    6. Nachman, David C., 1982. "Preservation of "more risk averse" under expectations," Journal of Economic Theory, Elsevier, vol. 28(2), pages 361-368, December.
    7. Kangoh Lee, 2010. "Risk aversion and self-insurance," Journal of Economics, Springer, vol. 101(3), pages 277-282, November.
    8. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-648, July-Aug..
    9. Kangoh Lee, 2007. "Wealth, Income, and Optimal Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(1), pages 175-184, March.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

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    2. Wong, Kit Pong, 2016. "Precautionary self-insurance-cum-protection," Economics Letters, Elsevier, vol. 145(C), pages 152-156.
    3. Oh, Miyoung & Hennessy, David A., 2014. "Upstream and Downstream Strategic Food Safety Interactions," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 174105, Agricultural and Applied Economics Association.
    4. Constantin ANGHELACHE & Mario G.R. PAGLIACCI & Emilia STANCIU & Cristina SACALÃ, 2016. "Essential aspects regarding the optimal prevention," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 64(1), pages 38-42, January.
    5. Oh, Miyoung, 2014. "Three essays on consumer choices on food," ISU General Staff Papers 201401010800005236, Iowa State University, Department of Economics.
    6. Tao Yuqing & Mei Jie & Cheng Wen & Zou Sijie, 2019. "Precautionary Effort Investment under Cross Risk Aversion," Journal of Systems Science and Information, De Gruyter, vol. 7(4), pages 344-358, August.
    7. Xue, Minggao & Cheng, Wen, 2013. "Background risk, bivariate risk attitudes, and optimal prevention," Mathematical Social Sciences, Elsevier, vol. 66(3), pages 390-395.
    8. Christophe Courbage & Henri Loubergé & Richard Peter, 2017. "Optimal Prevention for Multiple Risks," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 84(3), pages 899-922, September.

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    More about this item

    Keywords

    Self-protection; Background risk; Prudence;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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