The Absentminded Consumer

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The Absentminded Consumer

Author Info

John Leahy
Andrew Caplin

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Abstract

We develop a life-cycle model that captures "absent-mindedness": the fact that many households have only the sketchiest understanding of their pattern of spending. The model generates precautionary spending, whereby absent-minded agents tend to consume more than attentive ones. The model also predicts fluctuations over time in the level of attention, and thereby sheds new light on the sharp reduction in consumption both at retirement, and in cyclical downturns. Finally, the model suggests strong analogies between control problems of the sort encountered by our absent-minded consumer and the more familiar problems of self control. We test the model on data collected from a new survey of TIAA-CREF participants

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Publisher Info
Paper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number 784.

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Date of creation: 2004
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Handle: RePEc:red:sed004:784

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Paper
- John Ameriks & Andrew Caplin & John Leahy, 2004. "The Absent-Minded Consumer," NBER Working Papers 10216, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)

Find related papers by JEL classification:
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Annamaria Lusardi & Olivia S. Mitchell, 2006. "Baby Boomer Retirement Security: the Roles of Planning, Financial Literacy, and Housing Wealth," NBER Working Papers 12585, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Annamaria Lusardi & Olivia S. Mitchell, 2006. "Baby Boomer Retirement Security: The Roles of Planning, Financial Literacy,and Housing Wealth," CFS Working Paper Series 2006/20, Center for Financial Studies. [Downloadable!]
- Annamaria Lusardi & Olivia S. Mitchell, 2006. "Baby Boomer Retirement Security: The Roles of Planning, Financial Literacy, and Housing Wealth," Working Papers wp114, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
- Annamaria Lusardi & Olivia S. Mitchell, 2006. "Baby Boomer Retirement Security: The Roles of Planning, Financial Literacy, and Housing Wealth," CeRP Working Papers 54, Center for Research on Pensions and Welfare Policies, Turin (Italy). [Downloadable!]
- Lusardi, Annamaria & Mitchell, Olivia S., 2007. "Baby Boomer retirement security: The roles of planning, financial literacy, and housing wealth," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 205-224, January. [Downloadable!] (restricted)
Levy, Daniel & Lee, Dongwon & Chen, Allan (Haipeng) & Kauffman, Robert & Bergen, Mark, 2007. "Price Points and Price Rigidity," MPRA Paper 1472, University Library of Munich, Germany. [Downloadable!]
Other versions:
- Daniel Levy & Dongwon Lee & Haipeng Allan Chen & Robert J. Kauffman & Mark Bergen, 2007. "Price Points and Price Rigidity," Working Paper Series 04-07, Rimini Centre for Economic Analysis, revised Jul 2007. [Downloadable!]
Annamarie Lusardi & Olivia S. Mitchell, 2005. "Financial Literacy and Planning: Implications for Retirement Wellbeing," Working Papers wp108, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
Other versions:
- Annamaria Lusardi & Olivia S. Mitchell, 2006. "Financial Literacy and Planning: Implications for Retirement Wellbeing," DNB Working Papers 078, Netherlands Central Bank, Research Department. [Downloadable!]
- Annamaria Lusardi & Olivia S. Mitchell, 2005. "Financial Literacy and Planning: Implications for Retirement Wellbeing," CeRP Working Papers 46, Center for Research on Pensions and Welfare Policies, Turin (Italy). [Downloadable!]
Ricardo Reis, 2004. "Inattentive Consumers," NBER Working Papers 10883, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Ricardo Reis, 2004. "Inattentive Consumers," Working Papers 135, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics.. [Downloadable!]
- Reis, Ricardo, 2005. "Inattentive Consumers," CEPR Discussion Papers 5053, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Reis, Ricardo, 2006. "Inattentive consumers," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 1761-1800, November. [Downloadable!] (restricted)
John Ameriks & Andrew Caplin & John Leahy & Tom Tyler, 2004. "Measuring Self-Control," NBER Working Papers 10514, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Michael Ehrmann, 2006. "Rational inattention, inflation developments and perceptions after the euro cash changeover," Working Paper Series 588, European Central Bank. [Downloadable!]
Huffman, David & Barenstein, Matias, 2004. "Riches to Rags Every Month? The Fall in Consumption Expenditures Between Paydays," IZA Discussion Papers 1430, Institute for the Study of Labor (IZA). [Downloadable!]
Daniel Levy & Haipeng Allan Chen & Sourav Ray & Mark Bergen, 2004. "Asymmetric Price Adjustment "in the Small:" An Implication of Rational Inattention," Macroeconomics 0407012, EconWPA, revised 11 May 2005. [Downloadable!]
Other versions:
- Daniel Levy & Hainpeng (Allan) Chen & Sourav Ray & Mark Bergen, 2004. "Asymmetric Price Adjustment in the Small: An Implication of Rational Inattention," Emory Economics 0408, Department of Economics, Emory University (Atlanta). [Downloadable!]
- Daniel Levy & Haipeng (Allen) Chang & Sourav Ray & Mark Bergen, 2004. "Asymmetric Price Adjustment in the Small: An Implication of Rational Inattention," Working Papers 04-23, Utrecht School of Economics. [Downloadable!]

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This page was last updated on 2008-11-21.

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