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A Possibilistic and Probabilistic Approach to Precautionary Saving

Irina Georgescu (), Adolfo CristóbalCampoamor () and Ana Mª LuciaCasademunt ()
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Adolfo CristóbalCampoamor: Universidad Loyola Andalucía, Department of Economics, Sevilla, Spain
Ana Mª LuciaCasademunt: Corresponding author Universidad Loyola Andalucía, Department of Business Organization, Campus de Córdoba, Spain

Authors registered in the RePEc Author Service: Adolfo Cristobal-Campoamor ()

Panoeconomicus, 2017, vol. 64, issue 3, 273-295

Abstract: This paper proposes two mixed models to study a consumer’s optimal saving in the presence of two types of risk: income risk and background risk. In the first model, income risk is represented by a fuzzy number and background risk by a random variable. In the second model, income risk is represented by a random variable and background risk by a fuzzy number. For each model, three notions of precautionary savings are defined as indicators of the extra saving induced by income and background risk on the consumer’s optimal choice. In conclusion, we can characterize the conditions that allow for extra saving relative to optimal saving under certainty, even when a certain component of risk is modelled using fuzzy numbers.

Keywords: Optimal saving; Background risk; Income risk; Possibility theory (search for similar items in EconPapers)
JEL-codes: D31 D81 (search for similar items in EconPapers)
Date: 2017
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