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Rational consumers

Author

Listed:
  • 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) Households f having planning ability; and (3) Households f 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.

Suggested Citation

  • Kohei Kubota & Mototsugu Fukushige, 2009. "Rational consumers," Discussion Papers in Economics and Business 09-15, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:0915
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    Other versions of this item:

    • Kohei Kubota & Mototsugu Fukushige, 2016. "Rational Consumers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57(1), pages 231-254, February.

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    2. 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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    More about this item

    Keywords

    Life-Cycle/Permanent-Income-Hypothesis; Excess sensitivity; Rational expectation; Planning; Execution.;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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