We introduce a version of the DICE-2007 model designed for uncertainty analysis. DICE is a wide-spread deterministic integrated assessment model of climate change. Climate change, long-term economic development, and their interactions are highly uncertain. The quantitative analysis of optimal...

A disturbing feature of the conventional objective function for intertemporal decisions under uncertainty is that the agent's attitudes toward intertemporal substitution and risk aversion are entangled. This paper shows that, in contrast to common perception, the two attitudes can be completely...

We consider a dynamic allocation problem under alternative insurance and capital market regimes and proper risk aversion separate from intertemporal substitution. We apply the model to study the effect of one-size-fits-all transfers. We find that one-size-fits-all transfers can have different...

We analyze the impact of damage uncertainty on optimal mitigation policies in the integrated assessment of climate change. Usually, these models analyzeuncertainty by averaging deterministic paths. In contrast, we build a consistentmodel deriving optimal policy rules under persistent...

This Paper examines how aversion to risk and aversion to intertemporal substitution determines the strength of the precautionary saving motive in a two-period model with Kreps-Porteus preferences. For small risks, we derive a measure of the strength of the precautionary saving motive, which...

We consider a dynamic allocation problem under alternative insurance and capital market regimes and proper risk aversion separate from intertemporal substitution. We apply the model to study the effect of one-size-fits-all transfers. We find that one-size-fits-all transfers can have different...

Most intertemporal studies of risk are based on the constant relative risk aversion utility function. This has the property that the intertemporal elasticity of substitution and the coefficient of relative risk aversion are both consstant and inverses of each other. With the diversity of...

We analyze the impact of damage uncertainty on optimal mitigation policies in the integrated assessment of climate change. Usually, these models analyzeuncertainty by averaging deterministic paths. In contrast, we build a consistentmodel deriving optimal policy rules under persistent...

In this paper, we establish an axiomatically founded generalized recursive smooth ambiguity model that allows for a separation among intertemporal substitution, risk aversion, and ambiguity aversion. We axiomatize this model using two approaches: the second-order act approach à la Klibanoff et...

We introduce a version of the DICE-2007 model designed for uncertaintyanalysis. DICE is a wide-spread deterministic integrated assessment model of climatechange. Climate change, long-term economic development, and their interactionsare highly uncertain. The quantitative analysis of optimal...