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Preferences over wealth: Experimental evidence

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  • Gechert, Sebastian
  • Siebert, Jan

Abstract

Preferences over wealth are a channel to explain why households in the aggregate are less responsive when real interest rates fall. Following such preferences, they save more than would be optimal in 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.

Suggested Citation

  • Gechert, Sebastian & Siebert, Jan, 2022. "Preferences over wealth: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 1297-1317.
    • Handle: RePEc:eee:jeborg:v:200:y:2022:i:c:p:1297-1317
    DOI: 10.1016/j.jebo.2020.06.006
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    References listed on IDEAS

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    Cited by:

    1. Nobuyuki Hanaki & Yuta Shimodaira, 2024. "Wealth preferences and wealth inequality: Experimental evidence," ISER Discussion Paper 1260, Institute of Social and Economic Research, Osaka University.
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    3. Mika Akesaka & Ryo Mikami & Yoshiyasu Ono, 2024. "Insatiable Wealth Preference: Evidence from Japanese Household Survey," Discussion Paper Series DP2024-16, Research Institute for Economics & Business Administration, Kobe University, revised Oct 2024.
    4. Sebastian Gechert, 2023. "Fiscal policy: post- or New Keynesian?," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 20(2), pages 338-355, November.
    5. repec:dpr:wpaper:1241 is not listed on IDEAS

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    More about this item

    Keywords

    Consumption; Saving motives; Wealth; Experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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