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The prevention puzzle.

Han Bleichrodt1,2

  • 1Erasmus School of Economics, Erasmus University Rotterdam, Rotterdam, The Netherlands.

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Summary
This summary is machine-generated.

Economic theory struggles to guide prevention policy, a challenge known as the "prevention puzzle." New research suggests prudence, likelihood insensitivity, and loss aversion contribute to underprevention, offering insights for policy.

Keywords:
Loss aversionPrevention puzzleProbability weightingPrudenceRisk attitude

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Area of Science:

  • Economics
  • Public Policy
  • Behavioral Economics

Background:

  • The Ehrlich and Becker model (1972) proposed a simple framework for prevention (self-protection).
  • Subsequent research, primarily using expected utility theory, has yielded limited policy-relevant predictions, creating the "prevention puzzle."

Discussion:

  • This article explores the "prevention puzzle" by reviewing existing literature and presenting new findings under non-expected utility theory.
  • The impact of risk aversion on prevention decisions is complex and multifaceted.
  • Three key factors—prudence, likelihood insensitivity, and loss aversion—consistently contribute to underprevention.

Key Insights:

  • Under non-expected utility, prudence, likelihood insensitivity, and loss aversion are identified as unambiguous drivers of underprevention.
  • These behavioral factors complicate the derivation of clear policy guidance from economic models of prevention.
  • The study highlights the limitations of traditional economic paradigms in addressing real-world prevention decisions.

Outlook:

  • Future empirical research is crucial for a deeper understanding of prevention decision-making.
  • Integrating insights from behavioral economics can help resolve the "prevention puzzle."
  • Developing more nuanced theoretical models is essential for effective public policy on prevention.