On the substitution between saving and prevention

This work makes a joint analysis of prevention and saving decisions. First we determine the optimal levels of the two variables and we analyze substitution between them. Second we provide some results about the effects on optimal saving and prevention of changes in exogenous present and future wealth and in possible future loss. Finally we introduce insurance into the model and we extend the separation result, derived in the literature which studies the substitution between insurance and saving, to the case where prevention is considered too.

► We analyze substitution between prevention and saving in dealing with risk.
► We show that in general prevention and saving can be seen as substitutes.
► We study the equilibrium effects of changes in exogenous variables.
► We provide a separation result between saving, prevention and insurance.