A benchmark value for relative prudence.

Eeckhoudt, Louis;Etner, Johanna;Schroyen, Fred
(2007)

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  • Eeckhoudt, Louis
    Author
  • Etner, Johanna
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  • Schroyen, Fred
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Abstract
In this paper we propose benchmark values for the coefficients of relative risk aversion and relative prudence on the basis of a binary choice model where the decision maker chooses between aggregating or disaggragating multiplicative risks. We relate our results to the decison maker's willingness to trade-off the second with the first and the third (central) moment of his wealth distribution.
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Eeckhoudt, L., Etner, J., & Schroyen, F. (2007). A benchmark value for relative prudence. (CORE Discussion Papers 2007/86).