Even imprudent risk lovers may engage in precautionary saving

Even imprudent risk lovers may engage in precautionary saving

Recent developments in dynamic consumption theory have shown that risk-loving agents, much like their risk-averse analogues, can exhibit downside risk aversion (prudence) and thus demand precautionary savings. I complement this finding by showing that risk-seeking preferences also magnify the role o...

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Veröffentlicht in:Journal of economics (Vienna, Austria) Austria), 2024-09, Vol.143 (1), p.101-109
1. Verfasser: Sorge, Marco M.
Format: Artikel
Sprache:eng
Schlagworte:
Borrowing
Consumer behavior
Consumers
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Expected utility
Game Theory
Interest rates
Liquidity
Macroeconomics/Monetary Economics//Financial Economics
Microeconomics
Preferences
Public Finance
Random variables
Risk
Risk aversion
Risk behavior
Savings
Social and Behav. Sciences
Uncertainty
Utility functions
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Beschreibung
Zusammenfassung:Recent developments in dynamic consumption theory have shown that risk-loving agents, much like their risk-averse analogues, can exhibit downside risk aversion (prudence) and thus demand precautionary savings. I complement this finding by showing that risk-seeking preferences also magnify the role of natural borrowing limits in shaping consumers’ behavior, causing risk lovers to increase savings against income uncertainty in cases where risk averters would not: even imprudent risk lovers may engage in precautionary saving.
ISSN:0931-8658
1617-7134
DOI:10.1007/s00712-024-00865-y