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The Absent-Minded Consumer

Listed author(s):
  • John Ameriks
  • Andrew Caplin
  • John Leahy

We 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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File URL: http://www.nber.org/papers/w10216.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10216.

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Date of creation: Jan 2004
Handle: RePEc:nbr:nberwo:10216
Note: EFG
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  1. James Banks & Richard Blundell & Sarah Tanner, 1995. "Is there a retirement-savings puzzle?," IFS Working Papers W95/04, Institute for Fiscal Studies.
  2. Miles S. Kimball, 1989. "Precautionary Saving in the Small and in the Large," NBER Working Papers 2848, National Bureau of Economic Research, Inc.
  3. John Ameriks & Andrew Caplin & John Leahy, 2003. "Wealth Accumulation and the Propensity to Plan," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 1007-1047.
  4. John Ameriks & Andrew Caplin & John Leahy, 2002. "Retirement Consumption: Insights from a Survey," NBER Working Papers 8735, National Bureau of Economic Research, Inc.
  5. B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 1997. "What Accounts for the Variation in Retirement Wealth Among U.S. Households?," NBER Working Papers 6227, National Bureau of Economic Research, Inc.
  6. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  7. W. Pesendorfer & F. Gul, 1999. "Temptation and Self-Control," Princeton Economic Theory Papers 99f1, Economics Department, Princeton University.
  8. Erich Battistin & Raffaele Miniaci & Guglielmo Weber, 2003. "What do we learn from recall consumption data?," Temi di discussione (Economic working papers) 466, Bank of Italy, Economic Research and International Relations Area.
  9. James Dow, 1991. "Search Decisions with Limited Memory," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 1-14.
  10. Martin Browning & Thomas F. Crossley & Guglielmo Weber, 2002. "Asking Consumption Questions in General Purpose Surveys," Social and Economic Dimensions of an Aging Population Research Papers 77, McMaster University.
  11. Erich Battistin, 2002. "Errors in Survey Reports of Consumption Expenditures," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C4-2, International Conferences on Panel Data.
  12. Huck, S. & Müller, W., 2002. "Absent-minded drivers in the lab : Testing Gilboa's model," Other publications TiSEM d741c924-4e37-40ec-b617-4, Tilburg University, School of Economics and Management.
  13. Kocherlakota, Narayana R., 1998. "Money Is Memory," Journal of Economic Theory, Elsevier, vol. 81(2), pages 232-251, August.
  14. John Ameriks & Andrew Caplin & John Leahy & Tom Tyler, 2004. "Measuring Self-Control," NBER Working Papers 10514, National Bureau of Economic Research, Inc.
  15. Rubinstein, Ariel, 1995. "On the Interpretation of Decision Problems with Imperfect Recall," Mathematical Social Sciences, Elsevier, vol. 30(3), pages 324-324, December.
  16. A. Sandmo, 1970. "The Effect of Uncertainty on Saving Decisions," Review of Economic Studies, Oxford University Press, vol. 37(3), pages 353-360.
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