The Absent-Minded Consumer
AbstractWe present evidence that many households have only a vague notion of what they are spending on various consumption items. We then develop a life-cycle model that captures this absent-mindedness'. The model generates precautionary spending, whereby absent-minded agents tend to consume more than attentive ones. The model also predicts fluctuations over time in the level of attention, and thereby sheds new light on the sharp reduction in consumption both at retirement, and in cyclical downturns. Finally, we find patterns of attention in the data that are consistent with those predicted by the model.
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Date of creation: Jan 2004
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Other versions of this item:
- D9 - Microeconomics - - Intertemporal Choice
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-01-12 (All new papers)
- NEP-COM-2004-01-12 (Industrial Competition)
- NEP-DGE-2004-01-12 (Dynamic General Equilibrium)
- NEP-MAC-2004-01-12 (Macroeconomics)
- NEP-MIC-2004-01-12 (Microeconomics)
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