Saving Under Uncertainty: A Bivariate Non-Expected Utility Approach
AbstractWe adopt the multivariate non-expected utility approach proposed by Yaari  to provide a characterization of the comparative statics effects of greater risk aversion and of mean-preserving increases in risk on saving and borrowing in the presence of income and interest rate risk.We show that in Yaari's model, it is possible to extend the applicability of the Diamond and Stiglitz  and Kihlstrom and Mirman  (DSKM) single-crossing property to establish a relationship between greater risk aversion and saving (or borrowing) on the basis of the individual's ordinal preferences as long as the two risks are independent. We also demonstrate that the comparative statics effects of a joint mean-preserving increase in random income and interest rate on saving and borrowing can be determined by an extension of the DSKM single-crossing property. The Geneva Papers on Risk and Insurance Theory (1992) 17, 61–75. doi:10.1007/BF00941957
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Bibliographic InfoArticle provided by Palgrave Macmillan in its journal The Geneva Papers on Risk and Insurance Theory.
Volume (Year): 17 (1992)
Issue (Month): 1 (June)
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Other versions of this item:
- Fanny Demers & Michel Demers, 1991. "Saving Under Uncertainty : A Bivariate Non-Expected Utility Approach," Carleton Economic Papers 91-15, Carleton University, Department of Economics, revised Jun 1992.
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- Alain Chateauneuf & Ghizlane Lakhnati & Eric Langlais, 2005.
"On the precautionary motive for savings and prudence, in an EU and a NEU framework,"
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