Visibility Bias in the Transmission of Consumption Beliefs and Undersaving

Bing Han, David Hirshleifer and Johan Walden

No 25566, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We model visibility bias in the social transmission of consumption behavior. When consumption is more salient than non-consumption, people perceive that others are consuming heavily, and infer that future prospects are favorable. This increases aggregate consumption in a positive feedback loop. A distinctive implication is that disclosure policy interventions can ameliorate undersaving. In contrast with wealth-signaling models, information asymmetry about wealth reduces overconsumption. The model predicts that saving is influenced by social connectedness, observation biases, and demographic structure; and provides new insight into savings rates. These predictions are distinct from other common models of consumption distortions.

JEL-codes: D14 D83 D84 D85 D9 D91 G02 G11 G41 (search for similar items in EconPapers)
Date: 2019-02
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published as BING HAN & DAVID HIRSHLEIFER & JOHAN WALDEN, 2023. "Visibility Bias in the Transmission of Consumption Beliefs and Undersaving," The Journal of Finance, vol 78(3), pages 1647-1704.

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Journal Article: Visibility Bias in the Transmission of Consumption Beliefs and Undersaving (2023)
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