Trojani, Fabio Vanini, Paolo 1999 The paper presents a robust version of a simple two-assets Merton's (1969) model where the optimal choices and the implied shadow market prices of risk for a representative robust decision maker (RDM) can be easily described. With the exeption of the log utility case, precautionary behaviour is induced in the optimal consumption-investment rules through a substitution of investment in risky assets with both current consumption and riskless saving. For the log utility case, precautionary behaviour arises only through a substitution between risky and riskless assets. On the financial side, the decomposition of the market price of risk in a standard consumption based component and a further price for model uncertainty risk (which is positively related to the robustness parameter) is independent of the underlying risk aversion parameter. application/pdf https://localhost:5000/ark:/12658/srd1317900 https://susi.usi.ch/global/documents/317900 https://susi.usi.ch/documents/317900/files/wp9911.pdf eng info:eu-repo/semantics/altIdentifier/ark/12658/srd1317900 info:eu-repo/semantics/openAccess License undefined Merton's model knightian uncertainty model contamination model misspecification robust decision making info:eu-repo/classification/udc/33 A note on robustness in Merton's model of intertemporal consumption http://purl.org/coar/resource_type/c_816b