Temptation and Self-Control: Some Evidence from the Consumer Expenditure Survey∗
نویسندگان
چکیده
This paper empirically estimates a balanced-growth consistent, dynamic, structural model of intertemporal consumption and asset pricing that allows for, but does not assume, the GulPesendorfer preferences of temptation and self-control, using synthetic panel data constructed from the Consumer Expenditure Survey. One novelty of our model is that the cross-sectional distribution of wealth-consumption ratio is a potentially important determinant for the implied pricing kernel, additional to the cross-sectional distribution of consumption growth, while the importance of this additional factor depends on the strength of temptation and self-control. The estimates that we obtain provide evidence supporting the existence of temptation and self-control in preferences. With reasonable precision, we estimate a significant present-biased temptation strength, and we reject the null hypothesis of no temptation at common confidence levels. We explore the quantitative implications of the self-control problems for equity premium, risk-free rate, and asset price volatility. JEL classification: E44, C11, C15, G12
منابع مشابه
Temptation and Self-Control: Some Evidence and Applications
This paper studies the empirical relevance of temptation and self-control using household-level data from the Consumer Expenditure Survey. We estimate an infinite-horizon consumptionsavings model that allows, but does not require, temptation and self-control in preferences. To help identify the presence of temptation, we exploit an implication of the theory that a tempted individual has a prefe...
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