The Behavioral and Experimental Economics group has an influential position in this field in the Netherlands and Europe. CREED, the Amsterdam-based group, focuses particularly on three main projects: economics of political decision making; bounded rationality and institutions and experimental economics. The research of the Rotterdam-based group focuses on two broad themes: decision under risk and uncertainty and intertemporal choice.
- Baillon, A.
- The Economic Journal, Volume 127, Issue 604, September 2017, Pages 1731–1755
Under expected utility, prudence is equivalent to a positive third derivative of utility and plays a crucial role in precautionary saving behaviour. Eeckhoudt and Schlesinger (2006) proposed behavioural definitions of prudence and of higher order risk preferences. The present paper proposes a similar definition for prudence with respect to ambiguity, i.e., situations in which objective probabilities are not available. Implications for several ambiguity models are derived. Ambiguity prudence is implied by Hansen and Sargent’s (2001) multiplier preferences, empirically correlates with financial behaviour, and plays a key role in prevention behaviour.