Expectations-Based Reference-Dependent Life-Cycle Consumption
Abstract
I incorporate expectations-based reference-dependent preferences into a dynamic stochastic model to explain three major life-cycle consumption facts; the intuitions behind these three implications constitute novel connections between recent advances in behavioral economics and prominent ideas in the macro consumption literature. First, expectations-based loss aversion rationalizes excess smoothness and sensitivity in consumption, the puzzling...
Paper Details
Title
Expectations-Based Reference-Dependent Life-Cycle Consumption
Published Date
Jan 1, 2013
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