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The psychological cost of saving – an agent-based modelling approach

Author

Listed:
  • Elena DRUICA

    (University of Bucharest,Faculty of Business and Administration,Bucharest,Romania)

  • Rodica IANOLE

    (University of Bucharest,Faculty of Business and Administration,Bucharest,Romania)

  • Viorel CORNESCU

    (University of Bucharest,Faculty of Business and Administration,Bucharest,Romania)

Abstract

In this paper, an alternative hypothesis to the standard economic models of saving is proposed, based on new research in behavioral and computational economic. The importance of traditional factors of influence for saving is acknowledged, but the explanatory spectrum is extended by focusing on the conformity variable. If each individual from a specific group may initially have a low propensity to consume (and implicitly a high propensity to save), under group dynamics and direct/indirect group pressure all the individuals may change their behavior, leading to a new group mainly characterized by a propensity to consume. The hypothesis was validated by using NetLogo simulations, finding that saving behavior is bind by a psychological cost which has the potential to switch the individuals’ focus from a saving philosophy centered on benefits, to a philosophy centered on costs.

Suggested Citation

  • Elena DRUICA & Rodica IANOLE & Viorel CORNESCU, 2014. "The psychological cost of saving – an agent-based modelling approach," Romanian Journal of Economics, Institute of National Economy, vol. 39(2(48)), pages 34-48, December.
    • Handle: RePEc:ine:journl:v:39:y:2014:i:48:p:34-48
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    References listed on IDEAS

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    More about this item

    Keywords

    agent-based model; saving behavior; behavioral economics; social conformity.;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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