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Savings behavior with imperfect capital markets: when hyperbolic discounting leads to discontinuous strategies

Bertrand Wigniolle

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: This paper provides a detailed study of a simple life-cycle consumption model with quasi-hyperbolic discounting and an imperfect financial market. It gives a complete characterization of savings behaviors. The joint assumptions of quasi-hyperbolic discount factors and no-borrowing constraints may lead to non-convexities in selves' objective functions that may imply discontinuous equilibrium strategies. Savings function may undergo jumps and non-momotonicities when the income or the interest rate reach a threshold value. These "anomalies" may exist even for reasonable parameters values.

Keywords: Quasi-hyperbolic preferences; no-borrowing constraint; discontinuous strategies. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge
Date: 2011-04
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00594060
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Related works:
Journal Article: Savings behavior with imperfect capital markets: When hyperbolic discounting leads to discontinuous strategies (2012) Downloads
Working Paper: Savings behavior with imperfect capital markets: when hyperbolic discounting leads to discontinuous strategies (2011) Downloads
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