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Economic Theory

, Volume 25, Issue 2, pp 505–511 | Cite as

Saving under rank-dependent utility

  • Han BleichrodtEmail author
  • Louis Eeckhoudt
Article

Summary.

In this note we use the rank-dependent utility (RDU) model to analyze saving decisions. The RDU model enables us to separate the effects of pessimism and optimism on saving from that of concavity of the utility function. While pessimism induces more saving, the importance of this effect is shown to depend upon properties of the utility function such as prudence and temperance.

Keywords and Phrases:

Rank-dependent utility Saving Prudence Temperance. 

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Copyright information

© Springer-Verlag Berlin/Heidelberg 2005

Authors and Affiliations

  1. 1.iMTA/iBMGErasmus UniversityRotterdamTHE NETHERLANDS
  2. 2.Catholic FacultiesMonsBELGIUM

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