Chapter 14 Savings under Uncertainty: A General Model
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This chapter addresses savings decisions with additive separable preferences under a general description of uncertainty. First, a compact overview is given summarizing the most prominent aspects in the classical distinction between risk and uncertainty. Then an information-based description of uncertainty is employed to analyze the role of information in savings decisions. The decision maker is endowed with an information system which produces a signal correlated to the uncertain state of nature. Less uncertainty is described ex ante via higher informativeness of the information system in the sense of Blackwell’s sufficiency (Blackwell (1953)). Measures using the concept of Rho-concavity are developed which determine the reaction of savings to more uncertainty in the extreme cases of no or full insurance.

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