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Saving under rank-dependent utility

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  • 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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Related research

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

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Cited by:
  1. Le Grand, François & Chassagnon, Arnold & Bommier, Antoine, 2012. "Comparative Risk Aversion: A Formal Approach with Applications to Saving Behaviors," Economics Papers from University Paris Dauphine 123456789/4434, Paris Dauphine University.
  2. Antoine Bommier & François Grand, 2014. "Too risk averse to purchase insurance?," Journal of Risk and Uncertainty, Springer, vol. 48(2), pages 135-166, April.
  3. Christophe Courbage & Béatrice Rey, 2007. "Precautionary saving in the presence of other risks," Economic Theory, Springer, vol. 32(2), pages 417-424, August.
  4. Svenja Hector(), . "Accounting for Different Uncertainties: Implications for Climate Investments?," Working Papers ETH-RC-13-007, ETH Zurich, Chair of Systems Design.
  5. James Cox & Vjollca Sadiraj & Bodo Vogt & Utteeyo Dasgupta, 2013. "Is there a plausible theory for decision under risk? A dual calibration critique," Economic Theory, Springer, vol. 54(2), pages 305-333, October.
  6. Svenja Hector, 2013. "Accounting for Different Uncertainties: Implications for Climate Investments?," Working Papers 2013.107, Fondazione Eni Enrico Mattei.
  7. Osaki, Yusuke & Quiggin, John, 2008. "Stochastic dominance representation of optimistic belief: Theory and applications," Economics Letters, Elsevier, vol. 101(3), pages 275-278, December.
  8. 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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