Rational consumers

Kohei Kubota () and Mototsugu Fukushige ()
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Kohei Kubota: Graduate School of Economics, Osaka University

No 09-15, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

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.

Keywords: Life-Cycle/Permanent-Income-Hypothesis; Excess sensitivity; Rational expectation; Planning; Execution. (search for similar items in EconPapers)
JEL-codes: D12 D91 E21 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2009-05
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Working Paper: Rational Consumers (2011)
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