Scenario-Based Satisficing in Saving: A Theoretical and Experimental Analysis

Werner Gueth (), Maria Levati and Matteo Ploner
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Werner Gueth: Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany
Authors registered in the RePEc Author Service: Werner Güth ()

No 2007-049, Jena Economics Research Papers from Friedrich-Schiller-University Jena

Abstract: Contrary to the models of deterministic life cycle saving, we take it for granted that uncertainty of one's future is the essential problem of saving decisions. However, unlike the stochastic life cycle models, we capture this crucial uncertainty by a non-Bayesian scenario-based satisï¬ cing approach. Decision makers first form aspirations for a few relevant scenarios, and then search for saving plans satisficing these aspirations. In addition to formally specifying scenario-based satisficing in saving, we explore it experimentally. The results confirm that optimal intertemporal allocations are diffcult to derive, and suggest that satisficing allocations can be reached easily when aspirations are incentivized.

Keywords: Intertemporal allocation decisions; Bayesian updating; Satisï¬ cing behavior (search for similar items in EconPapers)
JEL-codes: C91 D81 D90 (search for similar items in EconPapers)
Date: 2007-08-22
New Economics Papers: this item is included in nep-cbe
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Citations: View citations in EconPapers (1)

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