Some Clarifications on Precautionary Behaviors
Kimball  developps a theory of prudence isomorphic to Pratt  and Arrow  theory of risk aversion. Nevertheless, if the Arrow-Pratt risk aversion index determines behavior in risk, it is not always the case for prudence. Moreover, concept of prudence and precautionary behavior are generally confused. In order to reconcile precautionary premium with behavior, this paper proposes some clarifications. We show, in an expected utility model as a non-expected utility one, that prudence attitude strongly depends on risk aversion.
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