Abstract: The formal definition of the term “prudence” in economics is due to Kimball [1990]. Since then the notion of prudence is linked to the choice of a level of precautionary saving while risk aversion remains perceived as a preference towards a risky situation. In this paper — after a survey of other publications than that of Kimball — we show that prudence can also be interpreted as a preference towards risk. We also show that prudence can be used to analyse insurance decisions as well as saving ones.Classification JEL: D81
Publication Year: 2005
Publication Date: 2005-01-01
Language: en
Type: article
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