Understanding intertemporal choices
Previous experimental results show clearly that many subjects do not optimize when solving a life-cycle consumption problem. What do they do? This paper attempts to resolve this question, looking at the discounting, hyperbolic and rolling models as possible explanations. Data from two experiments (one an experiment with a typical subject pool and the second an experiment with subjects from the CentER panel) is used, and the advantage of having experimental data is exploited, which means that one can actually estimate the hyperbolic model. It is shown that the (exponential) discounting model appears to give the best explanation - suggesting that subjects do look ahead (as they should) but increasingly less as time passes (as they should not in the context of these experiments).
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 38 (2006)
Issue (Month): 8 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEC20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEC20|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Laibson, David, 1998. "Life-cycle consumption and hyperbolic discount functions," European Economic Review, Elsevier, vol. 42(3-5), pages 861-871, May.
- Enrica Carbone & John D. Hey, 2004. "The effect of unemployment on consumption: an experimental analysis," Economic Journal, Royal Economic Society, vol. 114(497), pages 660-683, 07.
- Christopher Harris & David Laibson, 1999.
"Dynamic Choices of Hyperbolic Consumers,"
Harvard Institute of Economic Research Working Papers
1886, Harvard - Institute of Economic Research.
- Kivilcim Metin Ozcan & Asli Gunay & Seda Ertac, 2003.
"Determinants of private savings behaviour in Turkey,"
Taylor & Francis Journals, vol. 35(12), pages 1405-1416.
- Kivilcim Metin-Ozcan, 2002. "Determinants of Private Saving Behaviour in Turkey," Working Papers 0206, Department of Economics, Bilkent University.
- Hey, John D & Dardanoni, Valentino, 1987. "Optimal Consumption under Uncertainty: An Experimental Investigation," Economic Journal, Royal Economic Society, vol. 98(390), pages 105-16, Supplemen.
- Enrica Carbone, 2005. "Demographics and Behaviour," Experimental Economics, Springer, vol. 8(3), pages 217-232, September.
When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:38:y:2006:i:8:p:889-898. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.