A fresh look at primary prevention for health risks

Abstract

The author analyzes how risk preferences affect primary prevention for health risks using Kihlstrom and Mirman (1974) transformation function approach. This ensures consistency of ordinal preferences. Higher risk aversion may increase or decrease optimal prevention depending on a probability threshold. Higher downside risk aversion always has a negative effect on optimal prevention. Our findings corroborate the role of downside risk aversion as an important determinant of optimal prevention for health risks but renders fear of sickness irrelevant. We also point out several unique properties of prevention for health risks compared to financial risks.