EconStor Collection:
http://hdl.handle.net/10419/31
2024-03-19T07:31:59ZIncome risk, precautionary saving, and loss aversion: An empirical test
http://hdl.handle.net/10419/274064
Title: Income risk, precautionary saving, and loss aversion: An empirical test
Authors: Ibanez, Marcela; Schneider, Sebastian O.
Abstract: This paper empirically examines the behavioral precautionary saving hypothesis that uncertainty about future income triggers an increase in saving because of loss aversion. Guided by the theoretical model of Koszegi and Rabin (2009), we first extend their theoretical analysis to also consider the internal margin, i.e., the strength, of loss aversion, and then empirically study the relation between income risk, experimentally elicited loss aversion, and precautionary savings. We do so using a sample of 640 individuals from the low-income population of Bogotá, characterized by limited financial education and subject to substantial income risk. In line with the theoretical predictions, we find that an increase in income risk is associated with higher savings for loss-averse individuals, and that this increase in savings grows with the degree of loss aversion. An accompanying laboratory experiment confirms that an exogenous increase in income risk causally leads to this observed pattern. Thus, consistent with the theoretical predictions derived from the model of Koszegi and Rabin (2009), but in contrast to common assumptions, our findings establish that loss aversion is not necessarily an obstacle to saving, and thus identify new approaches of increasing saving among individuals with low financial education.2023-01-01T00:00:00ZThe economics of Hilbert's hotel: An expository note
http://hdl.handle.net/10419/274063
Title: The economics of Hilbert's hotel: An expository note
Authors: Hellwig, Martin
Abstract: This expository note uses Hilbert's "infinite hotel", a hotel where one can always find place for another guest even if the hotel is already full, to illustrate the failure of the First Welfare Theorem in "large-square" economies that have infinitely many participants as well as infinitely many goods. Hilbert's hotel with infinitely many guests has a similar mathematical structure as the overlapping-generations model of Allais (1947) and Samuelson (1958). The phenomenon of "dynamic inefficiency" in such models represents a failure of the First Welfare Theorem in "large-square" economies, rather than frictions from the sequential nature of markets.2023-01-01T00:00:00ZOverlapping-generations economies under uncertainty: Dynamic inefficiency/efficiency with multiple assets and no labour
http://hdl.handle.net/10419/274062
Title: Overlapping-generations economies under uncertainty: Dynamic inefficiency/efficiency with multiple assets and no labour
Authors: Hellwig, Martin
Abstract: The paper gives conditions for effi ciency and ineffi ciency of equilibrium allocations in an overlapping-generations model with a constant rate of population growth and with multiple assets, but without labour. Optimal portfolio choice implies that, for any period and history up to that period, the conditional certainty equivalents of the one-period-ahead marginal rates of return must be the same for all assets that are held in positive amounts. The effi ciency or ineffi ciency of equilibrium allocations depends on whether this common conditional certainty equivalent of returns on assets is larger or smaller than the population growth rate. If the growth rate is uncertain, the standard of comparison is the certainty equivalent of the population growth rate when interpreted as a marginal rate of return on an asset.2023-01-01T00:00:00ZThe importance of reciprocity: Investigating individual differences underlying conditional cooperation
http://hdl.handle.net/10419/274059
Title: The importance of reciprocity: Investigating individual differences underlying conditional cooperation
Authors: Bartosch, Léon; Mischkowski, Dorothee
Abstract: Several models of social preferences have been developed at the intersection of social psychology and behavioral economics, such as social value orientation (SVO) and conditional cooperation. Whereas SVO is well researched in its dispositional and situational correlates, we aim to locate conditional cooperation within the HEXACO personality model, particularly expecting a relation to reactive vs. active prosociality (i.e., Agreeableness vs. Honesty-Humility). Contrary to our expectations, however, in two preregistered, incentivized studies (n total = 521) conditional cooperation was neither related to Agreeableness nor to Honesty-Humility. When investigating the relation between SVO and conditional cooperation, we conceptually replicate a positive relation between both (pro-)social preferences. Surprisingly, while prosocials coincide with conditional cooperators, even most individualists who maximize their outcome in unilateral giving turn to conditionally cooperative behavior in strategic interactions. This underlines the importance of shaping situations as reciprocal acts to elicit cooperative behavior from originally self-interested individuals.2023-01-01T00:00:00Z