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

Bertrand Wigniolle

PSE-Ecole d'économie de Paris (Postprint) 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 behavior. 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. The savings function may undergo jumps and non-monotonicities when the income or the interest rate reaches a threshold value. These ''anomalies'' may exist even for reasonable parameter values.

Keywords: Quasi-hyperbolic preferences; No-borrowing constraint; Discontinuous strategies (search for similar items in EconPapers)
Date: 2012-08
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00684210v1
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Citations: View citations in EconPapers (7)

Published in Economics Letters, 2012, 116 (2), pp.186-189. ⟨10.1016/j.econlet.2012.02.014⟩

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Related works:
Journal Article: Savings behavior with imperfect capital markets: When hyperbolic discounting leads to discontinuous strategies (2012)
Working Paper: Savings behavior with imperfect capital markets: when hyperbolic discounting leads to discontinuous strategies (2012)
Working Paper: Savings behavior with imperfect capital markets: when hyperbolic discounting leads to discontinuous strategies (2012)
Working Paper: Savings behavior with imperfect capital markets: when hyperbolic discounting leads to discontinuous strategies (2011)
Working Paper: Savings behavior with imperfect capital markets: when hyperbolic discounting leads to discontinuous strategies (2011)
Working Paper: Savings behavior with imperfect capital markets: when hyperbolic discounting leads to discontinuous strategies (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-00684210

DOI: 10.1016/j.econlet.2012.02.014

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