Attitudes towards income risk in the presence of quantity constraints
Considering a consumer with standard preferences, I trace out the consequences for risk aversion and prudence of quantity constraints on markets. I first show how the effect can be decomposed into a price risk effect and an endogenously changing risk aversion/prudence effect. Next, I calibrate locally both effects on relative risk aversion and prudence, using estimates on household demand for durables and labour supply. Finally, I performa global numerical analysis of these effects. I conclude that quantity constraints have counter-intuitive and pronounced non-linear effects on risk attitudes.
|Date of creation:||07 Apr 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +47 55 959 277
Fax: 5595 9100
Web page: http://www.nhh.no/sam/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andrew Postlewaite & Larry Samuelson & Dan Silverman, 2006.
"Consumption Commitments and Employment Contracts,"
321307000000000145, UCLA Department of Economics.
- Andrew Postlewaite & Larry Samuelson & Dan Silverman, 2001. "Consumption Commitments and Employment Contracts," PIER Working Paper Archive 06-002, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 14 Jan 2006.
- Andrew Postlewaite & Larry Samuelson & Dan Silverman, 2006. "Consumption Commitments and Employment Contracts," PIER Working Paper Archive 06-028, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 07 Dec 2006.
When requesting a correction, please mention this item's handle: RePEc:hhs:nhheco:2011_007. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dagny Hanne Kristiansen)
If references are entirely missing, you can add them using this form.