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A Possibilistic and Probabilistic Approach to Precautionary Saving

Author

Listed:
  • Irina Georgescu

    () (Bucharest Academy of Economic Studies, Department of Computer Science and Cybernetics, Bucarest, Romania)

  • Adolfo CristóbalCampoamor

    () (Universidad Loyola Andalucía, Department of Economics, Sevilla, Spain)

  • Ana Mª LuciaCasademunt

    () (Corresponding author Universidad Loyola Andalucía, Department of Business Organization, Campus de Córdoba, Spain)

Abstract

This paper proposes two mixed models to study a consumer’s optimal saving in the presence of two types of risk: income risk and background risk. In the first model, income risk is represented by a fuzzy number and background risk by a random variable. In the second model, income risk is represented by a random variable and background risk by a fuzzy number. For each model, three notions of precautionary savings are defined as indicators of the extra saving induced by income and background risk on the consumer’s optimal choice. In conclusion, we can characterize the conditions that allow for extra saving relative to optimal saving under certainty, even when a certain component of risk is modelled using fuzzy numbers.

Suggested Citation

  • Irina Georgescu & Adolfo CristóbalCampoamor & Ana Mª LuciaCasademunt, 2017. "A Possibilistic and Probabilistic Approach to Precautionary Saving," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 64(3), pages 273-295, June.
  • Handle: RePEc:voj:journl:v:64:y:2017:i:3:p:273-295
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    References listed on IDEAS

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    More about this item

    Keywords

    Optimal saving; Background risk; Income risk; Possibility theory;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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