We report results from a laboratory experiment exploring the extent to which individuals can solve a deterministic, intertemporal lifecycle consumption optimization problem. The environment we study has a positive interest rate on savings and no discounting implying that the optimal consumption path should be linearly increasing over time, i.e., agents maximize their lifecycle payoff by smoothing their consumption over time. In addition to studying the individual intertemporal consumption/savings problem, we explore the role played by social information regarding the consumption/savings decisions of other, homogeneously endowed agents as well as the role played by an external habit formation specification for preferences. We find that subjects are generally closest to the conditionally optimal consumption path when they do not have access to social information on the consumption decisions made by other, similarly situated subjects or when social concerns (external habits) are explicitly incorporated into their utility functions.

Lifecycle Consumption Plans, Social Learning and External Habits: Experimental Evidence

CARBONE, Enrica;
2014

Abstract

We report results from a laboratory experiment exploring the extent to which individuals can solve a deterministic, intertemporal lifecycle consumption optimization problem. The environment we study has a positive interest rate on savings and no discounting implying that the optimal consumption path should be linearly increasing over time, i.e., agents maximize their lifecycle payoff by smoothing their consumption over time. In addition to studying the individual intertemporal consumption/savings problem, we explore the role played by social information regarding the consumption/savings decisions of other, homogeneously endowed agents as well as the role played by an external habit formation specification for preferences. We find that subjects are generally closest to the conditionally optimal consumption path when they do not have access to social information on the consumption decisions made by other, similarly situated subjects or when social concerns (external habits) are explicitly incorporated into their utility functions.
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11591/233064
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 23
  • ???jsp.display-item.citation.isi??? 23
social impact