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Prevention and Precaution

In: Handbook of Insurance

Author

Listed:
  • Christophe Courbage

    (Geneva School of Business Administration, HES-SO)

  • Richard Peter

    (University of Iowa)

  • Béatrice Rey

    (GATE Lyon Saint-Etienne, Université Lyon 2)

  • Nicolas Treich

    (INRAE, Toulouse School of Economics)

Abstract

This chapter surveys the economic literature on prevention and precaution. Prevention refers to costly activities that mitigate risk. Prevention encompasses self-protection, an investment to reduce the probability of loss, and self-insurance, an investment to reduce the severity of loss. Precaution is defined as an activity to alleviate potential harm in response to limited present information, which may become more complete over time. We first present results on prevention, including the effect of risk preferences, wealth, and background risk. We also summarize recent behavioral research on prevention. Second, we discuss how the concept of precaution can be linked to the effect of arrival of information and present the literature on precautionary effort.

Suggested Citation

  • Christophe Courbage & Richard Peter & Béatrice Rey & Nicolas Treich, 2025. "Prevention and Precaution," Springer Books, in: Georges Dionne (ed.), Handbook of Insurance, edition 0, pages 27-53, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-69674-9_2
    DOI: 10.1007/978-3-031-69674-9_2
    as

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    More about this item

    Keywords

    Prevention; Self-protection; Self-insurance; Precaution; Precautionary principle;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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