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A benchmark value for relative prudence

Author

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  • EECKHOUDT, Louis
  • ETNER, Johanna
  • SCHROYEN, Fred

Abstract

In this paper we propose benchmark values for the coefficients of relative risk aversion and relative prudence on the basis of a binary choice model where the decision maker chooses between aggregating or disaggragating multiplicative risks. We relate our results to the decison maker's willingness to trade-off the second with the first and the third (central) moment of his wealthdistribution.

Suggested Citation

  • EECKHOUDT, Louis & ETNER, Johanna & SCHROYEN, Fred, 2007. "A benchmark value for relative prudence," LIDAM Discussion Papers CORE 2007086, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2007086
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp2007.html
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    Cited by:

    1. Hippolyte D'Albis & Emmanuel Thibault, 2010. "Annuities, Bequests, and Portfolio Diversification," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(1), pages 75-91, February.

    More about this item

    Keywords

    relative risk aversion; relative prudence;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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