On the utility premium of Friedman and Savage

Louis Eeckhoudt and Harris Schlesinger

Economics Letters, 2009, vol. 105, issue 1, pages 46-48

Abstract: We re-examine the utility premium of Friedman-Savage [Friedman, Milton and Savage, Leonard J., "The Utility Analysis of Choices Involving Risk." Journal of Political Economy 56, 1948, pp. 279-304.]. This measure is useful in understanding risky choices. For instance its reaction to an increased wealth equates to a precautionary demand for saving. We also analyze its two components.

Keywords: Precautionary; saving; Prudence; Risk; aversion; Risk; premium; Utility; premium (search for similar items in EconPapers)
Date: 2009
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