Lifecycle Consumption Under Different Income Profiles: Experimental Evidence

John Duffy and Yue Li

No 161702, Working Papers from University of California-Irvine, Department of Economics

Abstract: We report on a series of economic decision-making experiments exploring how individuals make lifecycle consumption and saving plans when they face different income profiles. We find that for every income profile we consider, subjects on average over- consume in the early periods of life and under-consume in later periods of life relative to the conditional optimum and any sudden drop in income reduces their lifetime utility. We conduct a specification search for a model to explain our data and find that a two-type model with one type consuming the conditional optimum and the other type consuming endowments best fits our data.

Keywords: Bond markets; Lifecycle model; Consumption and savings; Retirement planning; Behavioral and experimental economics (search for similar items in EconPapers)
JEL-codes: C91 C92 D91 E21 H55 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2016-10
New Economics Papers: this item is included in nep-exp, nep-ltv, nep-mac and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:irv:wpaper:161702

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