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

Bertrand Wigniolle

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

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 behaviors. 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. Savings function may undergo jumps and non-momotonicities when the income or the interest rate reach a threshold value. These "anomalies" may exist even for reasonable parameters values

Keywords: Quasi-hyperbolic preferences; no-borrowing constraint; discontinuous strategies (search for similar items in EconPapers)
JEL-codes: D03 D91 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2011-04
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published in Economics Letters, 2012, 116, 2, pp.186-189

Downloads: (external link)
https://shs.hal.science/halshs-00594060 (application/pdf)
https://doi.org/10.1016/j.econlet.2012.02.014

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 (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)
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