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Rational consumers

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  • Kohei Kubota

    ()
    (Graduate School of Economics, Osaka University)

  • Mototsugu Fukushige

    ()
    (Graduate School of Economics, Osaka University)

Abstract

Life-Cycle/Permanent Income Hypothesis (LCPIH) could be decomposed into the following three hypotheses: (1) Rational expectation in a narrow sense; (2) Householdsf having planning ability; and (3) Householdsf having execution ability for his optimal consumption plan. We test the LCPIH by parts, considering whether consumers have ability to plan their optimal consumption or not and whether they execute their planned consumption or not. Main empirical result of the paper is that the ability to make the optimal consumption plan is not sufficient but that both the abilities to make the optimal consumption plan and to execute their plan are required to hold the LCPIH.

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Bibliographic Info

Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 09-15.

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Length: 34 pages
Date of creation: May 2009
Date of revision:
Handle: RePEc:osk:wpaper:0915

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Keywords: Life-Cycle/Permanent-Income-Hypothesis; Excess sensitivity; Rational expectation; Planning; Execution.;

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References

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Cited by:
  1. HASHIMOTO Hideki & ICHIMURA Hidehiko & SHIMIZUTANI Satoshi, 2013. "Stability of Preference against Aging and Health Shocks: A comparison between Japan and the United States," Discussion papers 13068, Research Institute of Economy, Trade and Industry (RIETI).

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