Preferences over wealth

Sebastian Gechert and Jan Siebert

No 200-2019, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: 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
Date: 2019
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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