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Optimal Consumption under Uncertainty: An Experimental Investigation

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  • Hey, John D
  • Dardanoni, Valentino

Abstract

This article describes a large-scale experimental investigation (using 128 subjects) into opt imal dynamic consumption behavior under income uncertainty. Payment w as linked to performance; nevertheless behavior departed significantl y from optimal behavior. The main focus of the research was on the co mparative static implications of actual behavior: to this end the aut hors used sixteen different parameter sets and found, after correctin g for differences in attitude toward risk, that the comparative stati c predictions of optimality theory were confirmed by the evidence. Th us behavior may agree with optimal behavior in a comparative, rather than absolute, sense. Copyright 1987 by Royal Economic Society.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 98 (1987)
Issue (Month): 390 (Supplement)
Pages: 105-16

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Handle: RePEc:ecj:econjl:v:98:y:1987:i:390:p:105-16

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Cited by:
  1. Ballinger, T.P. & Palumbo, M.G. & Wilcox, N.T., 1998. "Precautionary Saving in the Laboratory," Papers 98-04, Houston - Department of Economics.
  2. T. Parker Ballinger & Michael G. Palumbo & Nathaniel T. Wilcox, 2003. "Precautionary saving and social learning across generations: an experiment," Economic Journal, Royal Economic Society, vol. 113(490), pages 920-947, October.
  3. Vital Anderhub & Werner Güth & Uri Gneezy & Doron Sonsino, 2001. "On the Interaction of Risk and Time Preferences: An Experimental Study," German Economic Review, Verein für Socialpolitik, vol. 2(3), pages 239-253, 08.
  4. Ralf Rodepeter & Joachim K. Winter, 2000. "Rules of Thumb in Life-Cycle Savings Models," Econometric Society World Congress 2000 Contributed Papers 1222, Econometric Society.
  5. Ferruccio Ponzano & Roberto Ricciuti, 2012. "An Experimental AK Model of Growth," CESifo Working Paper Series 3744, CESifo Group Munich.
  6. Jeannette Brosig-Koch & Klemens Keldenich, 2012. "The More You Know? – Consumption Behavior and the Communication of Economic Information," Ruhr Economic Papers 0387, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  7. Enrica Carbone, 2006. "Understanding intertemporal choices," Applied Economics, Taylor & Francis Journals, vol. 38(8), pages 889-898.
  8. Harald Uhlig & Martin Lettau, 1999. "Rules of Thumb versus Dynamic Programming," American Economic Review, American Economic Association, vol. 89(1), pages 148-174, March.
  9. Enrique Fatás & Juan A. Lacomba & Francisco M. Lagos & Ana I. Moro, 2008. "Experimental tests on consumption, savings and pensions," ThE Papers 08/14, Department of Economic Theory and Economic History of the University of Granada..
  10. Lei, V. & Noussair, C., 2000. "An Experimental Test of an Optimal Growth Model," Purdue University Economics Working Papers 1131, Purdue University, Department of Economics.
  11. Wolfgang Luhan & Johann Scharler, 2013. "Monetary Policy, Inflation Illusion and the Taylor Principle: An Experimental Study," Working Papers 2013-03, Faculty of Economics and Statistics, University of Innsbruck.
  12. T. Ballinger & Eric Hudson & Leonie Karkoviata & Nathaniel Wilcox, 2011. "Saving behavior and cognitive abilities," Experimental Economics, Springer, vol. 14(3), pages 349-374, September.
  13. John Duffy, 2008. "Macroeconomics: A Survey of Laboratory Research," Working Papers 334, University of Pittsburgh, Department of Economics, revised Jun 2014.
  14. John Duffy & Enrica Carbone, 2013. "Lifecycle Consumption Plans, Social Learning and External Habits: Experimental Evidence," Working Papers 513, University of Pittsburgh, Department of Economics, revised Sep 2013.

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