IDEAS home Printed from https://ideas.repec.org/p/kyo/wpaper/940.html
   My bibliography  Save this paper

Precautionary saving with changing income ambiguity

Author

Listed:
  • Atsushi Kajii

    () (Institute of Economic Research, Kyoto University)

  • Jingyi Xue

    (Singapore Management University)

Abstract

We study a two-period saving model where the agent's future income might be ambiguous. Our agent has a version of the smooth ambiguity decision criterion (Klibanoff, Marinacci and Mukerji (2005)), where the agent's perception about ambiguity is described by a second-order belief over first-order risks. We model increasing ambiguity as a spreading-out of the second-order belief. We show that under a "Risk Comonotonicity" condition, our agent saves more when ambiguity in future income increases. We argue that the condition is indispensable for our result.

Suggested Citation

  • Atsushi Kajii & Jingyi Xue, 2016. "Precautionary saving with changing income ambiguity," KIER Working Papers 940, Kyoto University, Institute of Economic Research.
  • Handle: RePEc:kyo:wpaper:940
    as

    Download full text from publisher

    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP940.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Berger, Loïc, 2014. "Precautionary saving and the notion of ambiguity prudence," Economics Letters, Elsevier, vol. 123(2), pages 248-251.
    2. Arthur Snow, 2010. "Ambiguity and the value of information," Journal of Risk and Uncertainty, Springer, vol. 40(2), pages 133-145, April.
    3. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2005. "A Smooth Model of Decision Making under Ambiguity," Econometrica, Econometric Society, vol. 73(6), pages 1849-1892, November.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • 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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kyo:wpaper:940. 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: (Ryo Okui). General contact details of provider: http://edirc.repec.org/data/iekyojp.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.