| Article ID: | iaor2016202 |
| Volume: | 82 |
| Issue: | 4 |
| Start Page Number: | 977 |
| End Page Number: | 983 |
| Publication Date: | Dec 2015 |
| Journal: | Journal of Risk and Insurance |
| Authors: | Wang Jianli, Li Jingyuan |
| Keywords: | insurance, quality loss function |
This article shows that, in the temporal model of Eeckhoudt, Huang, and Tzeng (), prudence alone is sufficient to obtain a precautionary effort. Moreover, our conclusions relax the assumption of the convexity of loss probability. We further analyze the effect of the introduction or deterioration of background risks on precautionary effort in different settings.