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Even (Mixed) Risk Lovers are Prudent

David Crainich; Louis Eeckhoudt; Alain Trannoy
American Economic Review 2013 103(4), 1529-1535
The purpose of this note is to analyze properties of the risk lovers' utility function beyond the positive sign of its second order derivative. We show that—contrarily to a priori beliefs—risk lovers are prudent and are willing to accumulate precautionary savings. (JEL D81)