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Life cycle saving: Insights from the perspective of bounded rationality

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  • Binswanger, Johannes

Abstract

This paper provides a new life cycle model that takes into account key elements of bounded rationality. The paper shows that the model can account for patterns in the data that are hard to explain by the standard life cycle model. Among other patterns, the model predicts that, typically, the young either hold no equity or their equity portfolio share is rather low and then increases over working life. The analytical solution of the model demonstrates its high degree of tractability.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 56 (2012)
Issue (Month): 3 ()
Pages: 605-623

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Handle: RePEc:eee:eecrev:v:56:y:2012:i:3:p:605-623

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Web page: http://www.elsevier.com/locate/eer

Related research

Keywords: Behavioral economics; Bounded rationality; Feasibility goals; Hierarchical decision making; Life cycle saving; Portfolio choice;

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