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  5. Even (Mixed) Risk Lovers Are Prudent

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Even (Mixed) Risk Lovers Are Prudent

  • David Crainich
  • Louis Eeckhoudt
  • Alain Trannoy
American Economic Review
vol. 103, no. 4, June 2013
(pp. 1529–35)
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Abstract

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.

Citation

Crainich, David, Louis Eeckhoudt, and Alain Trannoy. 2013. "Even (Mixed) Risk Lovers Are Prudent." American Economic Review, 103 (4): 1529–35. DOI: 10.1257/aer.103.4.1529

JEL Classification

  • D81 Criteria for Decision-Making under Risk and Uncertainty