Consumption Commitments and Preferences for Risk
نویسندگان
چکیده
منابع مشابه
Consumption Commitments and Risk Preferences
Many households devote a large fraction of their budgets to consumption commitments goods that involve transaction costs and are infrequently adjusted. This paper characterizes risk preferences in an expected utility model with commitments. We show that commitments a¤ect risk preferences in two ways: (1) they amplify risk aversion with respect to moderate-stake shocks and (2) they create a ...
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A growing literature has proposed that consumption commitments shed light on several topics through their e¤ects on risk preferences. This paper provides evidence for the hypothesis that commitments a¤ect risk preferences by examining the link between housing and portfolio choice. Consumption commitment models predict that recent home purchasers should be more risk averse than those with long...
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We build a theory of reference-dependent preferences based on adjustment costs in consumption. The main contribution of the theory is that it endogenizes the evolution of the reference point. The reference point generated by our model exhibits several features exogenously assumed in existing theories: it (1) reects recent expectations, (2) depends on past consumption levels, and (3) diminishes...
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Studies of risk preference have empirically established two regularities that are inconsistent with the canonical expected utility model: (1) risk aversion over small gambles greatly exceeds risk aversion over larger stakes and (2) insurance buyers play the lottery. This paper characterizes risk preferences both theoretically and empirically in a world with two consumption goods, one of which i...
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ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2004
ISSN: 1556-5068
DOI: 10.2139/ssrn.548245