The effect on optimal consumption of increased uncertainty in labor income in the multiperiod case

  • Bruce L. Miller
Optimal Control Stochastic
Part of the Lecture Notes in Computer Science book series (LNCS, volume 41)


We consider a multiperiod, additive utility, optimal consumption model with a riskless investment and a stochastic labor income. The main result is that for utility functions belonging to the set F, consumption decreases when we go from any sequence of distribution functions representing labor income to a more risky sequence. It is shown that a concave utility function belongs to F if and only if its first derivative exists everywhere and is convex.


Utility Function Optimal Decision Labor Income Optimal Consumption Absolute Risk Aversion 
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Copyright information

© Springer-Verlag Berlin Heidelberg 1976

Authors and Affiliations

  • Bruce L. Miller
    • 1
  1. 1.WESTERN MANAGEMENT SCIENCE INSTITUTEUniversity of CaliforniaLos Angeles

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