On the relationship between absolute prudence and absolute risk aversion

M. A. Maggi, U. Magnani and Mario Menegatti

No 2003-EP04, Economics Department Working Papers from Department of Economics, Parma University (Italy)

Abstract: This paper shows how, under a few standard assumptions on the utility function, the monotonicity of absolute risk aversion (ARA) and of absolute prudence (AP) are connected. We get some general Propositions on the behaviour of the two functions regarding the positions and the number of their critical points. We also examine some cases where the shape of ap allows to completely determine that of ARA.

Keywords: absolute risk aversion; absolute prudence; precautionary saving (search for similar items in EconPapers)
JEL-codes: D11 D81 E21 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2003
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Journal Article: On the relationship between absolute prudence and absolute risk aversion (2006)
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