Preferences over wealth: Experimental evidence

Sebastian Gechert and Jan Siebert

Journal of Economic Behavior & Organization, 2022, vol. 200, issue C, 1297-1317

Abstract: Preferences over wealth are a channel to explain why households in the aggregate are less responsive when real interest rates fall. Following such preferences, they save more than would be optimal in a standard model. However, little is known about preferences over wealth empirically. We run an intentionally simple lab experiment on intertemporal spending and saving decisions with 180 students. Under a positive discount factor, zero interest and linear utility, maximizing behaviour would imply spending any funds instantaneously. While half of the participants behave optimally, we find a robust pattern where participants on average form and maintain a stock of wealth, consistent with wealth entering the utility function directly.

Keywords: Consumption; Saving motives; Wealth; Experiment (search for similar items in EconPapers)
JEL-codes: C91 D12 E21 E62 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:200:y:2022:i:c:p:1297-1317

DOI: 10.1016/j.jebo.2020.06.006

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