Book chapter
Prevention and Precaution
Handbook of Insurance Volume II, pp.27-53
Springer Nature Switzerland, Third edition
2025
DOI: 10.1007/978-3-031-69674-9_2
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.
Details
- Title: Subtitle
- Prevention and Precaution
- Creators
- Christophe Courbage - HES-SO GenèveRichard Peter - University of IowaBéatrice Rey - Université de LyonNicolas Treich - Toulouse School of Economics
- Contributors
- Georges Dionne (Editor)
- Resource Type
- Book chapter
- Publication Details
- Handbook of Insurance Volume II, pp.27-53
- Edition
- Third edition
- Publisher
- Springer Nature Switzerland; Cham
- DOI
- 10.1007/978-3-031-69674-9_2
- Language
- English
- Date published
- 2025
- Academic Unit
- Economics; Finance
- Record Identifier
- 9984795371602771
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