On the precautionary motive for savings and prudence in an EU and a NEU framework Alain CHATEAUNEUF, CERMSEM
نویسندگان
چکیده
In this paper we deal with the basic two-period consumption saving problem where the first and second period consumption utility, respectively v and u is assumed to be concave as usually. Considering the usual assumption of identity of u and v, we show that prudence is fully characterized by the convexity of u′ in the EU model. More interesting we prove that for the RDEU model, prudence is fully characterized by the convexity of u′ and strong pessimism. The paper ends by showing that for a strong risk averse RDEU decision maker, strict pessimism allows local weak prudence, whatever the sign of u′′′.
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1 CERMSEM, Maison des Sciences Economiques, Université Paris I Panthéon-Sorbonne, 106-112 Boulevard de l’Hôpital, 75647 Paris cedex 13, FRANCE (e-mail: [email protected]) 2 Alfred Weber Institute, Department of Economics, University of Heidelberg, Grabengasse 14, 69117 Heidelberg, GERMANY (e-mail: [email protected]) 3 Department of Economics, Rice University MS-22, ...
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