Precautionary saving and fuzzy information
TL;DR: The authors consider a two-period life-cycle model where uncertainty about future labour income is modelled by a fuzzy set and apply a defuzzification strategy that explicitly takes the individual's behaviour towards risk into account.
Abstract: We consider a two-period life-cycle model where uncertainty about future labour income is modelled by a fuzzy set. Applying a defuzzification strategy that explicitly takes the individual’s behaviour towards risk into account, we show that pessimistic individuals engage in precautionary savings even if marginal utility is not convex, e.g. in case of a quadratic utility function.
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TL;DR: The Arrow-Pratt theory of risk aversion was shown to be isomorphic to the theory of optimal choice under risk in this paper, making possible the application of a large body of knowledge about risk aversion to precautionary saving.
Abstract: The theory of precautionary saving is shown in this paper to be isomorphic to the Arrow-Pratt theory of risk aversion, making possible the application of a large body of knowledge about risk aversion to precautionary saving, and more generally, to the theory of optimal choice under risk In particular, a measure of the strength of precautionary saving motive analogous to the Arrow-Pratt measure of risk aversion is used to establish a number of new propositions about precautionary saving, and to give a new interpretation of the Oreze-Modigliani substitution effect
1,944 citations
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TL;DR: Jamel as discussed by the authors is an agent-based framework dedicated to modeling, simulation and analysis of complex monetary economies, and it contains the scenario used in the paper "Deleveraging crises and deep recessions: a behavioural approach" by Pascal Seppecher and Isabelle Salle.
Abstract: Jamel (Java Agent-based Macro-Economic Laboratory) is an open source agent-based framework dedicated to the modeling, the simulation and the analysis of complex monetary economies. This version (20140206) contains the scenario used in the paper "Deleveraging crises and deep recessions: a behavioural approach" by Pascal Seppecher and Isabelle Salle.
41 citations
Cites background from "Precautionary saving and fuzzy info..."
...This behaviour has been characterized as prudence in the related literature about savings and uncertainty that we follow there – e.g. Kimball (1990), Carroll et al. (1994) or Hauenschild and Stahlecker (2001)....
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TL;DR: This article developed a decentralized and micro-founded macro-economic agent-based model, augmented with an opinion model, which produces endogenous waves of pessimism and optimism that feed back into firms' leverage and households' precautionary saving behavior.
Abstract: Macroeconomic dynamics are characterized by alternating patterns of periods of relative stability and large swings. Standard micro-founded macro-economic models account for these patterns through exogenous and persistent shocks. In this paper, we develop a fully decentralized and micro-founded macro-economic agent-based model, augmented with an opinion model, which produces endogenous waves of pessimism and optimism that feed back into firms' leverage and households' precautionary saving behaviour. A major emergent property of our model is precisely the complex successions of stable and unstable macro-economic regimes. The model is further able to account for a wide spectrum of macro-and micro empirical regularities. Within this framework, we analyse a series of macro-economic phenomena of key relevance in the current macro-economic debate, especially the occurrence of deleveraging crises and Fisherian debt-deflation recessions. Our analysis suggests that the relative dynamics of prices and wages and the resulting income distribution along a deflation-ary path are critical determinants of the severity of the recession, and the chances of recovery.
34 citations
TL;DR: In this article, the authors consider a model of an oligopolistic market with heterogeneous firms and products where neither the cost nor the demand functions are common knowledge and each firm only has some vague ideas about the price strategies adopted by its competitors which is modelled by a fuzzy set.
Abstract: We consider a model of an oligopolistic market with heterogeneous firms and products where neither the cost nor the demand functions are common knowledge. Instead, each firm only has some vague ideas about the price strategies adopted by its competitors which is modelled by a fuzzy set. In analogy to the notion of an "equilibrium of actions and beliefs" we define and characterize a generalized Nash-equilibrium and show its existence under general conditions. Furthermore, the impact of the fuzzy information on the equilibrium outcome is analyzed by means of a comparative static analysis within a particular model framework.
4 citations
27 May 2007
TL;DR: The fuzzy information analysis method is used to forecast the peak discharge, with the result in accordance with the actual event, and can be seen as a new and effective method of flood prediction and forecasting.
Abstract: The relationship between the peak stage and peak discharge is influenced by many factors in the flood system. Therefore, different peak discharges may occur under the same peak stage, while the same peak discharge may also occur under the different peak stages. If the peak stage set with similar peak discharges is taken as the fuzzy subset in the stage universe, then the membership function of these fuzzy subsets can be hypothesized to manifest a normal distribution graph. According to a k and b k , the mid-value of the universe element of the peak stage can be substituted into the normal distribution graph, and the fuzzy relational matrix can be obtained. Thus, the peak discharge can be calculated according to the peak stage using the fuzzy deduction theory. The relationship between the peak stage and peak discharge as Q = f(H) has an important impact on the determination of the peak discharge during the high-water level period in the flood forecast. In this paper, the fuzzy information analysis method is used to forecast the peak discharge, with the result in accordance with the actual event. This method can be seen as a new and effective method of flood prediction and forecasting.
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TL;DR: In this paper, a new book about fuzzy set theory and its applications is presented, which can be used to explore the knowledge of the knowledge in a new way, even for only few minutes to read a book.
Abstract: Spend your time even for only few minutes to read a book. Reading a book will never reduce and waste your time to be useless. Reading, for some people become a need that is to do every day such as spending time for eating. Now, what about you? Do you like to read a book? Now, we will show you a new book enPDFd fuzzy set theory and its applications that can be a new way to explore the knowledge. When reading this book, you can get one thing to always remember in every reading time, even step by step.
4,041 citations
Posted Content•
TL;DR: The Arrow-Pratt theory of risk aversion was shown to be isomorphic to the theory of optimal choice under risk in this paper, making possible the application of a large body of knowledge about risk aversion to precautionary saving.
Abstract: The theory of precautionary saving is shown in this paper to be isomorphic to the Arrow-Pratt theory of risk aversion, making possible the application of a large body of knowledge about risk aversion to precautionary saving, and more generally, to the theory of optimal choice under risk In particular, a measure of the strength of precautionary saving motive analogous to the Arrow-Pratt measure of risk aversion is used to establish a number of new propositions about precautionary saving, and to give a new interpretation of the Oreze-Modigliani substitution effect
1,944 citations
"Precautionary saving and fuzzy info..." refers background in this paper
...1An (incomplete) list of the most important papers contains Skinner (1988), Zeldes (1989), Caballero (1990, 1991), Kimball (1990), Hubbard et al. (1994), and Carroll and Samwick (1997, 1998)....
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...This kind of behaviour is generally characterized as prudence (Kimball, 1990)....
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TL;DR: In this paper, the Arrow-Pratt theory of risk aversion is applied to the theory of optimal choice under risk, and a measure of the strength of the precautionary saving motive analogous to the ArrowPratt measure of risk avoidance is used to establish a number of new propositions about the necessity of saving and give a new interpretation of the Dreze-Modigliani substitution effect.
Abstract: The theory of precautionary saving is shown to be isomorphic to the Arrow-Pratt theory of risk aversion, making possible the application of a large body of knowledge about risk aversion to precautionary saving--and more generally, to the theory of optimal choice under risk. In particular, a measure of the strength of the precautionary saving motive analogous to the Arrow-Pratt measure of risk aversion is used to establish a number of new propositions about precautionary saving and to give a new interpretation of the Dreze-Modigliani substitution effect. Copyright 1990 by The Econometric Society.
1,555 citations
TL;DR: In this article, a two-period model was developed to analyze rigorously the precautionary demand for saving, which is defined as the extra saving caused by future income being random rather than determinate.
Abstract: Publisher Summary This chapter discusses a two-period model developed to analyze rigorously the precautionary demand for saving. The precautionary demand for saving is usually described as the extra saving caused by future income being random rather than determinate. The effect of uncertainty on saving becomes obfuscated by generality. Many of the usual outlets for consumer saving, including saving deposits and government bonds, offer a fixed monetary rate of return. A multi-period model would be necessary to explore fully the effect of assets on the precautionary demand for saving. Until further progress is made with the more powerful inter-temporal models of optimization under uncertainty, the two-period model must be accepted along with its conclusion that states that under reasonable assumptions, there exists a positive precautionary demand for saving.
1,277 citations
"Precautionary saving and fuzzy info..." refers background in this paper
...…models it has early been recognized that risk aversion (i.e. a strictly concave utility function u) is not the only relevant aspect of preferences in determining optimal consumption and savings in the presence of stochastic incomes (Leland, 1968; Sandmo, 1970; `Dreze and Modigliani, 1972)....
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937 citations
"Precautionary saving and fuzzy info..." refers background in this paper
...a strictly concave utility function u) is not the only relevant aspect of preferences in determining optimal consumption and savings in the presence of stochastic incomes (Leland, 1968; Sandmo, 1970; ` Dreze and Modigliani, 1972)....
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...…models it has early been recognized that risk aversion (i.e. a strictly concave utility function u) is not the only relevant aspect of preferences in determining optimal consumption and savings in the presence of stochastic incomes (Leland, 1968; Sandmo, 1970; `Dreze and Modigliani, 1972)....
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