Chen Lian, University of California, Berkeley. "Mistakes in Future Consumption, High MPCs Now"

Department seminar. Chen Lian is an assistant professor of Economics at UC Berkeley. He will present the paper: "Mistakes in Future Consumption, High MPCs Now"

Photo of Chen Lian

Chen Lian

Abstract:

This paper develops an approach to study predictions independent from the exact psychological cause of behavioral mistakes. In a canonical intertemporal consumption problem, I show how anticipation of future mistakes, by itself, explains key deviations from the permanent income hypothesis. The result provides a potential explanation of the empirical puzzle on high liquidity consumers’ high marginal propensities to consume (MPCs) and violations of the fungibility principle. I also illustrate how my framework can accommodate most widely-studied behavioral biases, such as inattention, mental accounting, rules of thumb, and hyperbolic discounting.

Link to paper (pdf).

 

Login information:

Meeting ID: 696 6521 8146

Passcode: EconSem

Published Oct. 9, 2020 11:41 AM - Last modified Nov. 9, 2021 9:38 AM