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Saving under rank-dependent utility

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Author Info

  • Han Bleichrodt

    ()

  • Louis Eeckhoudt

    ()

Abstract

In this note we use the rank-dependent utility (RDU) model to analyze saving decisions. The RDU model enables us to separate the effects of pessimism and optimism on saving from that of concavity of the utility function. While pessimism induces more saving, the importance of this effect is shown to depend upon properties of the utility function such as prudence and temperance. Copyright Springer-Verlag Berlin/Heidelberg 2005

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File URL: http://hdl.handle.net/10.1007/s00199-003-0455-3
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 25 (2005)
Issue (Month): 2 (02)
Pages: 505-511

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Handle: RePEc:spr:joecth:v:25:y:2005:i:2:p:505-511

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Web page: http://link.springer.de/link/service/journals/00199/index.htm

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Related research

Keywords: Rank-dependent utility; Saving; Prudence; Temperance.;

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Cited by:
  1. Christophe Courbage & Béatrice Rey, 2007. "Precautionary saving in the presence of other risks," Economic Theory, Springer, vol. 32(2), pages 417-424, August.
  2. Bommier, Antoine & Chassagnon, Arnold & Le Grand, François, 2010. "Comparative Risk Aversion: A Formal Approach with Applications to Savings Behaviors," TSE Working Papers 10-141, Toulouse School of Economics (TSE).
  3. Osaki, Yusuke & Quiggin, John, 2008. "Stochastic dominance representation of optimistic belief: Theory and applications," Economics Letters, Elsevier, vol. 101(3), pages 275-278, December.
  4. Denuit, Michel & Rey, Béatrice, 2010. "Prudence, temperance, edginess, and risk apportionment as decreasing sensitivity to detrimental changes," Mathematical Social Sciences, Elsevier, vol. 60(2), pages 137-143, September.

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