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Savings behavior with imperfect capital markets : when hyperbolic discounting leads to discontinuous strategies

  • Bertrand Wigniolle


    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics)

This paper provides a detailed study of a simple life-cycle consumption model with quasi-hyperbolic discounting and an imperfect financial market. It gives a complete characterization of savings behaviors. The joint assumptions of quasi-hyperbolic discount factors and no-borrowing constraints may lead to non-convexities in selves' objective functions that may imply discontinuous equilibrium strategies. Savings function may undergo jumps and non-momotonicities when the income or the interest rate reach a threshold value. These "anomalies" may exist even for reasonable parameters values.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00594060.

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Date of creation: Apr 2011
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Handle: RePEc:hal:cesptp:halshs-00594060
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  1. Bertrand Wigniolle, 2011. "Savings behavior with imperfect capital markets : when hyperbolic discounting leads to discontinuous strategies," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00594060, HAL.
  2. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  3. Favero, Carlo A., 2005. "Consumption, Wealth, the Elasticity of Intertemporal Substitution and Long-Run Stock Market Returns," CEPR Discussion Papers 5110, C.E.P.R. Discussion Papers.
  4. Bertrand Wigniolle, 2013. "Fertility in the absence of self-control," PSE - Labex "OSE-Ouvrir la Science Economique" halshs-00823264, HAL.
  5. Harris, Christopher & Laibson, David, 2001. "Dynamic Choices of Hyperbolic Consumers," Econometrica, Econometric Society, vol. 69(4), pages 935-57, July.
  6. Laibson, David, 1998. "Life-cycle consumption and hyperbolic discount functions," European Economic Review, Elsevier, vol. 42(3-5), pages 861-871, May.
  7. repec:hal:journl:halshs-00594060 is not listed on IDEAS
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