Intertemporal consumption and debt aversion: An experimental study

Arbeitspapier

This paper tests how subjects behave in an intertemporal consumption/saving experiment when borrowing is allowed and whether subjects treat debt differently than savings. Two treatments create environments where either saving or borrowing is required for optimal consumption. Since both treatments share the same optimal consumption levels, actual consumption choices can be directly compared across treatments. The experimental findings imply that deviations from optimal behavior are higher when subjects have to borrow than when they have to save in order to consume optimally, suggesting debt-aversion. Signifiant underconsumption is observed when subjects have to borrow in order to reach optimal consumption. Only weak evidence is found suggesting that subjects over-consume when saving is necessary for optimal consumption.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB 649 Discussion Paper ; No. 2013-045

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Individual ; Criteria for Decision-Making under Risk and Uncertainty ; Macroeconomics: Consumption; Saving; Wealth
• Subject: Laboratory Experiment ; Intertemporal Consumption ; Consumption Smoothing ; Debt Aversion

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Meissner, Thomas
• Event: Veröffentlichung
• (who): Humboldt University of Berlin, Collaborative Research Center 649 - Economic Risk
• (where): Berlin
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/91581
• Last update: 10.03.2025, 11:44 AM CET