Prudence and Precautionary Effort
研究了在多种损失状态下，收入不确定性如何影响预防性努力，发现审慎既非增加预防性努力的充分条件也非必要条件，并给出了审慎增加或减少预防性努力的直观条件。
Abstract It is well known that prudence increases precautionary effort in the presence of future uncertain income. This result is intuitive, as prudent individuals take more caution to reduce the probability of accident in response to income uncertainty. However, this known result holds true only in a two‐state model with either a loss or no loss occurring. With more than two states of the world, losses of different magnitudes occur, and precautionary effort may not reduce the probabilities of all losses. The effect of income uncertainty on precautionary effort hinges on how it affects the probability distribution of losses, and prudence is neither necessary nor sufficient for more precaution. The analysis establishes an intuitive condition under which prudence increases precaution and another one under which prudence decreases it.