Savings behavior with imperfect capital markets: when hyperbolic discounting leads to discontinuous strategies
نویسنده
چکیده
The joint assumptions of quasi-hyperbolic discounting and imperfect capital market lead to non-convexities in selves’ objective functions that may imply discontinuous equilibrium strategies. If this property was early recognized, authors generally take assumptions on parameters that allow to avoid the problem. In contrast to the literature, I choose to give a full characterization of these strategies in a simple model that allows a complete determination of savings behavior. Savings function undergoes jumps and nonmonotonicities when the incomes or the interest rates reach threshold values. These "anomalies" may exist even for "reasonable" parameters values. JEL classification: D03, D91
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