Precautionary saving and fuzzy information

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. (C) 2001 Elsevier Science B.V. All rights reserved. JEL classification: D81; D91.