Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/20728
Authors: 
Huffman, David
Barenstein, Matias
Year of Publication: 
2004
Series/Report no.: 
IZA Discussion paper series 1430
Abstract: 
This paper finds declining consumption expenditure between paydays, for a typical household in the working population of the UK. The magnitude is inconsistent with exponential time preference, but compatible with quasi-hyperbolic discounting. However, the hyperbolic model predicts that credit constraints drive the decline, and we find only mixed evidence in this regard. We also observe a method-of-payment result that suggests a role for mental accounting: households choose declining cash spending but flat credit-card spending over the pay period. We propose an alternative explanation for the results, based on cognitive costs of budgeting and perceptual biases, rather than self-control problems.
Subjects: 
consumption
hyperbolic-discounting
payday
mental accounting
reference-dependent preferences
credit cards
JEL: 
D12
D11
J33
B49
Document Type: 
Working Paper

Files in This Item:
File
Size
610.11 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.