Risk Aversion and Optimal Prevention: A Monotone Comparative Statics Approach

Jian Zhang; Richard Peter; Jingyuan Li; Jianli Wang

doi:10.2139/ssrn.6569858

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Risk Aversion and Optimal Prevention: A Monotone Comparative Statics Approach

Working paper

Open access

Risk Aversion and Optimal Prevention: A Monotone Comparative Statics Approach

Jian Zhang, Richard Peter, Jingyuan Li and Jianli Wang

SSRN

04/20/2026

DOI: 10.2139/ssrn.6569858

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Abstract

Using the interval dominance order, we show that an increase in risk aversion always raises optimal self-insurance. We provide conditions under which it also raises optimal self-protection and extend the results to self-insurance-cum-protection. Our analysis is motivated by prevention technologies with threshold effects, where small effort levels are ineffective and objective functions need not be hump-shaped, so the first-order approach may fail. We make only minimal assumptions on preferences and technologies and thus derive comparative statics under considerably weaker conditions, broadening the scope of existing results.

Details

Title: Subtitle: Risk Aversion and Optimal Prevention: A Monotone Comparative Statics Approach
Creators: Jian Zhang - Le Moyne College
Richard Peter - University of Iowa
Jingyuan Li - Lingnan University
Jianli Wang - Nanjing University of Aeronautics and Astronautics
Resource Type: Working paper
DOI: 10.2139/ssrn.6569858
Publisher: SSRN
Number of pages: 25 pages
Language: English
Date posted: 04/20/2026
Academic Unit: Economics; Finance
Record Identifier: 9985157600302771

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