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

Bertrand Wigniolle 1, 2

(04/2011)

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.

1 :	Centre d'économie de la Sorbonne (CES)
	CNRS : UMR8174 – Université Paris I - Panthéon-Sorbonne
2 :	Ecole d'Économie de Paris - Paris School of Economics (EEP-PSE)
	Ecole d'Économie de Paris

Discipline

:

Sciences de l'Homme et Société/Economie et finances

Mots-Clés : Quasi-hyperbolic preferences – no-borrowing constraint – discontinuous strategies.

halshs-00594060, version 1

http://halshs.archives-ouvertes.fr/halshs-00594060

oai:halshs.archives-ouvertes.fr:halshs-00594060

Contributeur : Lucie Label <>

Soumis le : Mercredi 18 Mai 2011, 16:04:26

Dernière modification le : Jeudi 19 Mai 2011, 10:10:45