Abstract
Optimum loss prevention and loss reduction activities are examined in this study for an economic agent with constant absolute risk aversion facing Poisson distributed losses in an insurance market dominated by a monopolist insurer. It is shown that the risk aversion coefficient, size of a loss, and productivity of loss prevention affect the optimum loss prevention level. Also it is proven that optimum loss reduction depends upon the risk aversion coefficient, expected number of losses, productivity of loss reduction, and size of a loss. New contributions of the article are summarized in the last section.
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