On the relationship between absolute prudence and absolute risk aversion
This paper shows how, under a few standard assumptions on the utility function, the monotonicity of absolute risk aversion (ARA) and of absolute prudence (AP) are connected. We get some general Propositions on the behaviour of the two functions regarding the positions and the number of their critical points. We also examine some cases where the shape of ap allows to completely determine that of ARA.
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|Date of creation:||2003|
|Date of revision:|
|Contact details of provider:|| Postal: Via J.F. Kennedy 6, 43100 PARMA (Italy)|
Web page: http://economia.unipr.it/de
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- Menegatti, Mario, 2001. "On the Conditions for Precautionary Saving," Journal of Economic Theory, Elsevier, vol. 98(1), pages 189-193, May.
- Miles S. Kimball, 1989.
"Precautionary Saving in the Small and in the Large,"
NBER Working Papers
2848, National Bureau of Economic Research, Inc.
- Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
- Kimball, Miles S, 1993.
"Standard Risk Aversion,"
Econometric Society, vol. 61(3), pages 589-611, May.
- Pratt, John W & Zeckhauser, Richard J, 1987. "Proper Risk Aversion," Econometrica, Econometric Society, vol. 55(1), pages 143-54, January.
- A. Sandmo, 1970. "The Effect of Uncertainty on Saving Decisions," Review of Economic Studies, Oxford University Press, vol. 37(3), pages 353-360.
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