Intertemporal Consumption and Debt Aversion: An Experimental Study

Thomas Meissner

VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association

Abstract: This paper tests how subjects behave in an intertemporal consumption/saving experiment when borrowing is allowed and whether subjects treat debt differently than savings. Two treatments create environments where either saving or borrowing is required for optimal consumption. Since both treatments share the same optimal consumption levels, actual consumption choices can be directly compared across treatments. The experimental findings imply that deviations from optimal behavior are higher when subjects have to borrow than when they have to save in order to consume optimally, suggesting debt-aversion. Signifiant underconsumption is observed when subjects have to borrow in order to reach optimal consumption. Only weak evidence is found suggesting that subjects over-consume when saving is necessary for optimal consumption.

JEL-codes: C91 D91 E21 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-mac and nep-upt
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Citations: View citations in EconPapers (16)

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https://www.econstor.eu/bitstream/10419/100522/1/VfS_2014_pid_955.pdf (application/pdf)

Related works:
Journal Article: Intertemporal consumption and debt aversion: an experimental study (2016)
Working Paper: Intertemporal consumption and debt aversion: An experimental study (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc14:100522

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