WWRC 91-11
Risk, Self-Protection, and Ex Ante Economic Value
Abstract
We develop three propositions about the ex ante value of reduced risk. If there is a
continuous outcome disiribution and if self-protection influences outcome probability and
severity, then (1) unobservable utility terms cannot be eliminated from the ex ante value
expressions: (2) knowledge of the convexity or the nonconvexity of dose-response functions is
insufficient to sign changes in these expressions: and (3) self-protection expenditures need
not be a lower bound measure of these expressions. Therefore, many restrictions applied in
recent empirical work on the economic value of risk changes are not immediately transferable
to settings where endogenous risks prevail.
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