The Hyperbolic Consumption Model: Calibration, Simulation, and Empirical Evaluation
Top Cited Papers
- 1 August 2001
- journal article
- Published by American Economic Association in Journal of Economic Perspectives
- Vol. 15 (3) , 47-68
- https://doi.org/10.1257/jep.15.3.47
Abstract
Laboratory and field studies of time preference find that discount rates are much greater in the short run than in the long run. Hyperbolic discount functions capture this property. This paper presents simulations of the savings and asset allocation choices of households with hyperbolic preferences. The behavior of the hyperbolic households is compared to the behavior of exponential households. The hyperbolic households borrow much more frequently in the revolving credit market. The hyperbolic households exhibit greater consumption income comovement and experience a greater drop in consumption around retirement. The hyperbolic simulations match observed consumption and balance sheet data much better than the exponential simulations.Keywords
This publication has 46 references indexed in Scilit:
- The Response of Household Consumption to Income Tax RefundsAmerican Economic Review, 1999
- The Reaction of Household Consumption to Predictable Changes in Social Security TaxesAmerican Economic Review, 1999
- Self-Control and Saving for RetirementBrookings Papers on Economic Activity, 1998
- Modeling Myopic Decisions: Evidence for Hyperbolic Delay-Discounting within Subjects and AmountsOrganizational Behavior and Human Decision Processes, 1995
- The importance of precautionary motives in explaining individual and aggregate savingCarnegie-Rochester Conference Series on Public Policy, 1994
- Do Saving Incentives Work?Brookings Papers on Economic Activity, 1994
- Anomalies in Intertemporal Choice: Evidence and an InterpretationThe Quarterly Journal of Economics, 1992
- Choice in a self-control paradigm with human subjects: Effects of changeover delay durationLearning and Motivation, 1987
- Testing the Response of Consumption to Income Changes with (Noisy) Panel DataThe Quarterly Journal of Economics, 1987
- The Permanent Income Hypothesis and Consumption Durability: Analysis Based on Japanese Panel DataThe Quarterly Journal of Economics, 1985