Should we do more when we know less? The effect of technology risk on optimal effort
研究了当自我保险和自我保护措施的效果受外部因素影响或未知时，技术风险如何改变最优努力水平，并给出了比较静态分析的条件，对风险管理决策有参考价值。
Abstract Technology risk arises when the effectiveness of self‐insurance and self‐protection activities depends on exogenous factors or is only imperfectly known. It affects optimal behavior via a preference channel and a technology channel. In this paper, we identify conditions for unambiguous comparative statics with respect to the presence of, as well as various stochastic changes in technology risk. These conditions involve prudence, relative risk aversion, relative prudence, and several new measures of mitigation efficacy. We highlight cases where technology risk raises the optimal level of effort, consistent with the precautionary principle. We discuss several applications of our results.