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Precautionary saving and the notion of ambiguity prudence

Author

Listed:
  • Loïc Berger

    (CNRS - Centre National de la Recherche Scientifique, IÉSEG School Of Management [Puteaux], EIEE - European Institute on Economics and the Environment, CMCC - Centro Euro-Mediterraneo per i Cambiamenti Climatici [Bologna])

Abstract

This letter develops a set of simple conditions under which an individual is willing to save an extra amount of money due to the presence of ambiguity concerning his second period wealth. This extra precautionary saving motive is naturally associated with the notion of ambiguity prudence.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Loïc Berger, 2014. "Precautionary saving and the notion of ambiguity prudence," Post-Print hal-03027142, HAL.
    • Handle: RePEc:hal:journl:hal-03027142
    DOI: 10.1016/j.econlet.2014.02.019
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    Citations

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    Cited by:

    1. Peter, Richard, 2019. "Revisiting precautionary saving under ambiguity," Economics Letters, Elsevier, vol. 174(C), pages 123-127.
    2. Loïc Berger & Louis Eeckhoudt, 2021. "Risk, ambiguity, and the value of diversification," Post-Print hal-02910906, HAL.
    3. Diego C. Nocetti, 2018. "Ambiguity and the value of information revisited," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 43(1), pages 25-38, May.
    4. Berger, Loïc & Bosetti, Valentina, 2020. "Characterizing ambiguity attitudes using model uncertainty," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 621-637.
    5. Loic Berger & Valentina Bosetti, 2016. "Ellsberg Re-revisited: An Experiment Disentangling Model Uncertainty and Risk Aversion," Working Papers 2016.37, Fondazione Eni Enrico Mattei.
    6. Loïc Berger & Louis Eeckhoudt, 2020. "Risk, Ambiguity, And The Value Of Diversification," Working Papers hal-02910906, HAL.
    7. Donatella Baiardi & Marco Magnani & Mario Menegatti, 2020. "The theory of precautionary saving: an overview of recent developments," Review of Economics of the Household, Springer, vol. 18(2), pages 513-542, June.
    8. Loïc Berger & Johannes Emmerling & Massimo Tavoni, 2017. "Managing Catastrophic Climate Risks Under Model Uncertainty Aversion," Post-Print hal-03027150, HAL.
    9. Eric André & Antoine Bommier & François Le Grand, 2022. "The impact of risk aversion and ambiguity aversion on annuity and saving choices," Journal of Risk and Uncertainty, Springer, vol. 65(1), pages 33-56, August.
    10. Simon Quemin, 2016. "Intertemporal abatement decisions under ambiguity aversion in a cap and trade," Working Papers 1604, Chaire Economie du climat.
    11. Loïc Berger & Louis Eeckhoudt, 2021. "Risk, Ambiguity, and the Value of Diversification," Management Science, INFORMS, vol. 67(3), pages 1639-1647, March.
    12. Atsushi Kajii & Jingyi Xue, 2016. "Precautionary Saving with Changing Income Ambiguity," Economics and Statistics Working Papers 2-2017, Singapore Management University, School of Economics.
    13. Francesco Fabbri & Giulio Principi & Lorenzo Stanca, 2024. "Absolute and Relative Ambiguity Attitudes," Papers 2406.01343, arXiv.org, revised Jun 2024.
    14. Loïc Berger & Johannes Emmerling & Massimo Tavoni, 2017. "Managing Catastrophic Climate Risks Under Model Uncertainty Aversion," Management Science, INFORMS, vol. 63(3), pages 749-765, March.
    15. Han Bleichrodt & Christophe Courbage & Béatrice Rey, 2019. "The value of a statistical life under changes in ambiguity," Journal of Risk and Uncertainty, Springer, vol. 58(1), pages 1-15, February.
    16. Rachel J. Huang & Arthur Snow & Larry Y. Tzeng, 2017. "Advantageous Selection in Insurance Markets with Compound Risk," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 42(2), pages 171-192, September.
    17. Camille Cornand & Maria Alejandra Erazo Diaz & Béatrice Rey & Adam Zylbersztejn, 2023. "On the robustness of higher order attitudes to ambiguity framing," Working Papers hal-04316734, HAL.
    18. Loïc Berger, 2016. "The impact of ambiguity and prudence on prevention decisions," Theory and Decision, Springer, vol. 80(3), pages 389-409, March.
    19. Claudio A. Bonilla & Pablo A. Gutiérrez Cubillos, 2021. "The effects of ambiguity on entrepreneurship," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(1), pages 63-80, February.
    20. Trautmann, Stefan T. & Kuilen, Gijs van de, 2018. "Higher order risk attitudes: A review of experimental evidence," European Economic Review, Elsevier, vol. 103(C), pages 108-124.
    21. Suen, Richard M. H., 2022. "Precautionary Saving Behaviour under Ambiguity," MPRA Paper 114382, University Library of Munich, Germany.
    22. Peter, Richard & Ying, Jie, 2020. "Do you trust your insurer? Ambiguity about contract nonperformance and optimal insurance demand," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 938-954.
    23. Berger, Loïc, "undated". "The Impact of Ambiguity Prudence on Insurance and Prevention," Climate Change and Sustainable Development 198893, Fondazione Eni Enrico Mattei (FEEM).
    24. Takao Asano & Yusuke Osaki, 2022. "Precautionary Saving against Correlation under Risk and Ambiguity," KIER Working Papers 1071, Kyoto University, Institute of Economic Research.
    25. Baillon, Aurélien & Placido, Lætitia, 2019. "Testing constant absolute and relative ambiguity aversion," Journal of Economic Theory, Elsevier, vol. 181(C), pages 309-332.

    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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