EconPapers    
Economics at your fingertips  
 

Durable Consumption and Asset Management with Transaction and Observation Costs

Fernando Alvarez, Luigi Guiso () and Francesco Lippi

American Economic Review, 2012, vol. 102, issue 5, 2272-2300

Abstract: The empirical evidence on rational inattention lags the theoretical developments: micro evidence on one of the most immediate consequences of observation costs--the infrequent observation of state variables--is not available in standard datasets. We contribute to filling the gap using new household surveys. To match these data we modify existing models, shifting the focus from nondurable to durable consumption. The model features both observation and transaction costs and implies a mixture of time-dependent and state-dependent rules. Numerical simulations explain the frequencies of trading and observation of the median investor with small observation costs and larger transaction costs. (JEL D12, D14, E21, G11)

Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35) Track citations by RSS feed

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.5.2272 (application/pdf)
http://www.aeaweb.org/aer/data/aug2012/20100633_data.zip dataset accompanying article (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Durable consumption and asset management with transaction and observation costs (2010) Downloads
Working Paper: Durable Consumption and Asset Management with Transaction and Observation Costs (2010) Downloads
Working Paper: Durable Consumption and Asset Management with Transaction and Observation Costs (2010) Downloads
Working Paper: Durable consumption and asset management with transaction and observation costs (2010) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:102:y:2012:i:5:p:2272-2300

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().

 
Page updated 2019-08-22
Handle: RePEc:aea:aecrev:v:102:y:2012:i:5:p:2272-2300