Optimal Consumption under Uncertainty: An Experimental Investigation.

This article describes a large-scale experimental investigation (using 128 subjects) into opt imal dynamic consumption behavior under income uncertainty. Payment w as linked to performance; nevertheless behavior departed significantl y from optimal behavior. The main focus of the research was on the co mparative static implications of actual behavior: to this end the aut hors used sixteen different parameter sets and found, after correctin g for differences in attitude toward risk, that the comparative stati c predictions of optimality theory were confirmed by the evidence. Th us behavior may agree with optimal behavior in a comparative, rather than absolute, sense. Copyright 1987 by Royal Economic Society.