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Risky targets and effort

Author

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  • Chuang, O-Chia
  • Eeckhoudt, Louis
  • Huang, Rachel J.
  • Tzeng, Larry Y.

Abstract

When decision makers invest in effort to reach their targets, they face multiple sources of risk: first the risk of failure and second the noise that surrounds either the target or the initial situation. In this paper, we examine how effort is adjusted to account for changes in this risky environment.

Suggested Citation

  • Chuang, O-Chia & Eeckhoudt, Louis & Huang, Rachel J. & Tzeng, Larry Y., 2013. "Risky targets and effort," Insurance: Mathematics and Economics, Elsevier, vol. 52(3), pages 465-468.
    • Handle: RePEc:eee:insuma:v:52:y:2013:i:3:p:465-468
    DOI: 10.1016/j.insmatheco.2013.02.004
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    Cited by:

    1. Crainich, David & Eeckhoudt, Louis & Menegatti, Mario, 2016. "Changing risks and optimal effort," Journal of Economic Behavior & Organization, Elsevier, vol. 125(C), pages 97-106.
    2. Mario Menegatti, 2023. "A note on changes in additive risky benefits and risky costs," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(3), pages 753-763, September.
    3. Dennis W. Jansen & Liqun Liu, 2022. "Portfolio choice in the model of expected utility with a safety-first component," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 45(1), pages 187-207, June.
    4. Huang, Rachel J., 2012. "Ambiguity aversion, higher-order risk attitude and optimal effort," Insurance: Mathematics and Economics, Elsevier, vol. 50(3), pages 338-345.
    5. Huang, Yi-Chieh & Tzeng, Larry Y. & Zhao, Lin, 2015. "Comparative ambiguity aversion and downside ambiguity aversion," Insurance: Mathematics and Economics, Elsevier, vol. 62(C), pages 257-269.
    6. Desu Liu & Mario Menegatti, 2019. "Optimal saving and health prevention," Journal of Economics, Springer, vol. 128(2), pages 177-191, October.
    7. 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.
    8. Crainich, David & Menegatti, Mario, 2021. "Self-protection with random costs," Insurance: Mathematics and Economics, Elsevier, vol. 98(C), pages 63-67.
    9. Wang, Jianli & Wang, Hongxia & Yick, Ho Yin, 2019. "How do changes in risk and risk aversion affect self-protection with Selden/Kreps–Porteus preferences?," Insurance: Mathematics and Economics, Elsevier, vol. 88(C), pages 1-6.
    10. Wong, Kit Pong, 2017. "A note on risky targets and effort," Insurance: Mathematics and Economics, Elsevier, vol. 73(C), pages 27-30.
    11. P. Battiston & M. Menegatti, 2022. "Interaction in Prevention: A General Theory and an Application to COVID-19 Pandemic," Economics Department Working Papers 2022-EP02, Department of Economics, Parma University (Italy).

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    More about this item

    Keywords

    Effort; Increase in risk; Stochastic dominance; Higher-order preferences;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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