Preferences over wealth
Sebastian Gechert () and
No 200-2019, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute
Preferences over wealth can explain why households do not spend more when real interest rates fall, because they save more than optimal under 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: D12 E21 E62 H23 (search for similar items in EconPapers)
Pages: 44 pages
New Economics Papers: this item is included in nep-mac and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:imk:wpaper:200-2019
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