Back to Library

Risk, Self-Protection, and Ex Ante Economic Value

Published by:
Document
Download
Publication date
09/05/1990
Number of Pages
29
Language:
English
Type of Publication:
Working Papers & Briefs
Focus Region:
Global
Focus Topic:
Market / Trade
Institutions / Organizations
Type of Risk:
Market-related
Policy & institutional
Type of Risk Managment Option:
Risk coping
Risk assessment
Commodity:
Crops
Author
Jason F. Shogren, Thomas D. Crocker
Organization
Center for Agricultural and Rural Development (CARD)

This document develops three propositions about the ex ante value of reduced risk. If there is a continuous outcome distribution 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 non-convexity 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.