An experimental study of decisions in dynamic optimization problems

Kenneth Matheny () and Charles Noussair
Additional contact information
Kenneth Matheny: Macroeconomic Advisers LLC., St Louis, MO 63105, USA

Economic Theory, 2000, vol. 15, issue 2, 389-419

Abstract: We study decisions of subjects who are given an incentive to solve dynamic optimization problems with the structure of a single-agent, one-sector, closed economy macroeconomic model. The decision task involves a sequence of choices of consumption and investment levels. Treatment variables consist of the initial endowment of capital stock, the production technology available to the economy, and the method of creating the structure of an infinite-horizon model. The study includes and contrasts data from both American and Japanese participants. We find that whether over- or underinvestment relative to the optimum occurs depends on the production technology, but not on the initial endowment of capital stock, nor the subject pool used, nor the method of implementing the infinite horizon. Sudden episodes of maximal consumption called binges, which are always suboptimal, are widely observed.

Keywords: Dynamic optimization; Consumption; Investment; Experiment. (search for similar items in EconPapers)
Date: 2000-02-21
Note: Received: December 7, 1998; revised version: March 12, 1999
References: Add references at CitEc
Citations: View citations in EconPapers (48)

Downloads: (external link)
http://link.springer.de/link/service/journals/00199/papers/0015002/00150389.pdf (application/pdf)
Access to the full text of the articles in this series is restricted

Related works:
Working Paper: An Experimental Study of Decisions in Dynamic Optimization Problems (1998)
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:spr:joecth:v:15:y:2000:i:2:p:389-419

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().