Since the advent of the discounted utility (DU) model economists have thought about intertemporal choice in very specific terms. DU assumes that people make explicit tradeoffs between costs and benefits occurring at different points in time. While this explicit tradeoff perspective is simple and...

Consumption growth is predictable, a basic violation of the permanent-income hypothesis. This paper examines three possible explanations: rule-of-thumb behavior, in which households allow consumption to track per-period income flows rather than permanent income; habit persistence; and...

There is vast literature examining how households’ income and consumption change over the life cycle. These studies, however, are usually restricted to developed economies. The main objective of this paper is to add to this literature by investigating the life cycle profiles and relative...

This paper analyzes the self-identification process and its role in motivation. We build a model of self-confidence where people have imperfect knowledge about their ability, which in most tasks is a complement to effort in determining performance. Higher self-confidence thus enhances...

Many purchase and consumption choices are shaped by clear-cut constraints, either budgetary or temporal. You buy a house, for example, after considering your income, life expectancy, and the size of the mortgage you can obtain. But what about the constraints in smaller but repeated purchase and...

Behavioral economics identifies myriad deviations from classical economic assumptions about consumer decision-making, but lacks evidence on how its diverse phenomena fit together and whether they are amenable to modeling as low-dimensional constructs. We pursue such parsimony on three fronts,...

Variations in consumers' responsiveness to interest rates across households and over time may have important implications for monetary transmission. Survey questions from the Michigan Survey of Consumers provide an indication of the degree to which interest rates are a prominent consideration in...

Using account-level credit card data from a major Turkish bank we show the impact of a unique restrictive credit card policy on consumption and debt repayment behavior. The complex policy imposes two types of soft liquidity constraints for certain credit card holders: progressively higher...

We solve a rich life-cycle model of household decisions involving consumption of perishable goods and housing services, habit formation for housing consumption, stochastic labor income, stochastic house prices, home renting and owning, stock investments, and portfolio constraints. In line with...

The Great Recession and the years that followed witnessed a dramatic expansion in the duration of unemployment insurance (UI) benefits available to unemployed workers in the United States. An important motivation for this policy was to stimulate demand by transferring funds to households that...