This is an entry for The New Palgrave Dictionary of Economics, 2nd Ed.

This is an entry for The New Palgrave Dictionary of Economics, 2nd Ed.

Zeldes (1989) Carroll (1992; 1993), and others have shown that optimal consumption behavior for consumers facing income uncertainty can be remarkably different from the certainty-equivalent case. Carroll (1992; 1993) observes that many of the differences can be attributed to the concavity of the...