In this paper we extend the theory of precautionary saving to the case in which uncertainty is multidimensional and we develop a matrix-measure of multivariate prudence. Furthermore, we characterize comparative prudence, decreasing and increasing prudence, the e¤ect of uncertainty on the marginal propensity to consume out of wealth, and the Drèze-Modigliani substitution e¤ect in this multivaria...

appreciated by most men. In the business world, risk, when adroitly judged, can lead to significant rewards. By contrast, most men tend to be somewhat risk averse, not only financially, but also more importantly in terms of approaching their health. Attitudes between the sexes vary, as does their willingness to seek medical help and advice. Women tend to seek help earlier and are much more like...

Using the industrial organization approach to the microeconomics of banking we model a large (Monti-Klein) bank which is risk neutral and faces credit uncertainty in its loan business. The impact of capital adequacy regulation and the effect of changes in risk on deposit and loan rates are analyzed. We then show that capital adequacy regulation induces the bank to behave as if it were risk aver...

This paper characterizes the conditions for risk aversion in cumulative prospect theory where risk aversion is defined in the strong sense of Rothschild and Stiglitz (1970). Under weaker assumptions than differentiability we show that risk aversion implies convex weighting functions for gains and for losses but not necessarily a concave utility function. Also, we investigate the exact relations...