Publication Type
Working Paper
Version
publishedVersion
Publication Date
6-2016
Abstract
We study a two-period saving model where theagent’s future income might be ambiguous. Our agent has a version of the smoothambiguity decision criterion (Klibano, Marinacci and Mukerji (2005)), where theagent’s perception about ambiguity is described by a second-order belief overfirst-order risks. We model increasing ambiguity as a spreading-out of thesecond-order belief. We show that under a “Risk Comonotonicity” condition, ouragent saves more when ambiguity in future income increases. We argue that thecondition is indispensable for our result.
Keywords
Precautionary Saving, Smooth Ambiguity, Increasing Ambiguity, Risk Comonotonicity, Informativeness
Discipline
Economic Theory
Research Areas
Economic Theory
First Page
1
Last Page
10
Publisher
SMU Economics and Statistics Working Paper Series, No. 02-2017
City or Country
Singapore
Citation
KAJII, Atsushi and Jingyi XUE.
Precautionary Saving with Changing Income Ambiguity. (2016). 1-10.
Available at: https://ink.library.smu.edu.sg/soe_research/1905
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.