Optimal Saving with Additive and Multiplicative Background Risk
We study optimal saving when incomes are certain and risk bears on consumption. A key finding is that, with CARA utility and additive uncertain consumption, or CRRA utility and multiplicative consumption, risk-averse individuals do not form precautionary saving as in the standard theory of saving under uncertainty.
|Date of creation:||01 Oct 2004|
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- Kimball, Miles S, 1990.
"Precautionary Saving in the Small and in the Large,"
Econometric Society, vol. 58(1), pages 53-73, January.
- Miles S. Kimball, 1989. "Precautionary Saving in the Small and in the Large," NBER Working Papers 2848, National Bureau of Economic Research, Inc.
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- Dreze, Jacques H. & Modigliani, Franco, 1972. "Consumption decisions under uncertainty," Journal of Economic Theory, Elsevier, vol. 5(3), pages 308-335, December.
- DREZE, Jacques H. & MODIGLIANI, Franco, "undated". "Cosumption decisions under uncertainty," CORE Discussion Papers RP 119, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Christian Gollier, 2004. "The Economics of Risk and Time," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262572249, September.
- A. Sandmo, 1970. "The Effect of Uncertainty on Saving Decisions," Review of Economic Studies, Oxford University Press, vol. 37(3), pages 353-360.
- Günter Franke & Harris Schlesinger & Richard C. Stapleton, 2006. "Multiplicative Background Risk," Management Science, INFORMS, vol. 52(1), pages 146-153, January.
- Franke, Günter & Schlesinger, Harris & Stapleton, Richard C., 2002. "Multiplicative background risk," Discussion Papers, various Research Units FS IV 02-06, Social Science Research Center Berlin (WZB).
- Günter Franke & Harris Schlesinger & Richard C. Stapleton, 2003. "Multiplicative Background Risk," CoFE Discussion Paper 03-05, Center of Finance and Econometrics, University of Konstanz.
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