The income effect under uncertainty: A Slutsky-like decomposition with risk aversion

Elena Antoniadou, Leonard Mirman and Marc Santugini

Economic Modelling, 2016, vol. 55, issue C, 169-178

Abstract: We study the effect of changing income on optimal decisions in the multidimensional expected utility framework with strongly separable preferences. Using the Kihlstrom and Mirman (1974) (KM) utility representation, we show that the effect of changing income can be decomposed into a modified income effect linked to the classical income effect and an effect representing attitudes to risk, modified by income.

Keywords: Classical demand theory; Consumption–saving problem; Income; Risk aversion; Uncertainty (search for similar items in EconPapers)
Date: 2016
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Working Paper: The Income Effect under Uncertainty: a Slutsky-Like Decomposition with Risk Aversion (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:55:y:2016:i:c:p:169-178

DOI: 10.1016/j.econmod.2016.02.012

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