Who saves more, the naive or the sophisticated agent?

• 成果类型: Article
• 署名作者: Groneck, Max; Ludwig, Alexander; Zimper, Alexander
• 署名单位: University of Groningen; Goethe University Frankfurt; Centre for Economic Policy Research - UK; University of Pretoria
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2024.105848
• 发表日期: 2024
• 关键词: life-cycle model; Discount functions; dynamic inconsistency; Epstein-Zin-Weil preferences; income risk

摘要

This paper studies discrete time finite horizon life-cycle models with arbitrary discount functions and iso-elastic per period power utility with concavity parameter theta. We distinguish between the savings behavior of a sophisticated versus a naive agent. Although both agent types have identical preferences, they solve different utility maximization problems whenever the model is dynamically inconsistent. Pollak (1968) shows that the savings behavior of both agent types is nevertheless identical for logarithmic utility (theta = 1). We generalize this result by showing that the sophisticated agent saves in every period a greater fraction of her wealth than the naive agent if and only if theta >= 1. While this result goes through for model extensions that preserve linearity of the consumption policy function, it breaks down for non-linear model extensions.