Even (Mixed) Risk Lovers are Prudent

The purpose of this note is to analyze properties of the risk lovers' utility function beyond the positive sign of its second order derivative. We show that--contrarily to a priori beliefs--risk lovers are prudent and are willing to accumulate precautionary savings. (JEL D81) [PUBLICATION ABSTR...

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Bibliographic Details
Published in:The American economic review 2013-06, Vol.103 (4), p.1529-1535
Main Authors: Crainich, David, Eeckhoudt, Louis, Trannoy, Alain
Format: Article
Language:English
Subjects:
Convexity
Economic theory
Economics and Finance
Expected utility
Financial risk
Humanities and Social Sciences
Lotteries
Macroeconomics
Precautionary savings
Property
Random variables
Risk aversion
Risk aversion preference
Risk management
Shorter Papers
Signs
Studies
Total utility
Utility functions
Utility models
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Summary:The purpose of this note is to analyze properties of the risk lovers' utility function beyond the positive sign of its second order derivative. We show that--contrarily to a priori beliefs--risk lovers are prudent and are willing to accumulate precautionary savings. (JEL D81) [PUBLICATION ABSTRACT]
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.103.4.1529