On the precautionary motive for savings and prudence, in an EU and a NEU framework
Alain Chateauneuf (),
Ghizlane Lakhnati and
Eric Langlais ()
Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL
In this paper, we deal with the basic two-period consumption saving problem where the first and second period consumption utility, respectively v is assumed to be concave as usually. Considering the usual assumption of identify 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 pesimism. 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'''.
Keywords: prudence and local weak prudence; Modèle EU; modèle RDEU; aversion forte pour le risque; pessimisme; prudence et prudence locale faible.; EU model; RDEU model; strong risk aversion; pessimism; prudence and local weak prudence. (search for similar items in EconPapers)
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Published in 2005
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Working Paper: On the precautionary motive for savings and prudence, in an EU and a NEU framework (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:halshs-00194667
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