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The Absent-Minded Consumer

Author

Listed:
  • John Ameriks
  • Andrew Caplin
  • John Leahy
Abstract
We present evidence that many households have only a vague notion of what they are spending on various consumption items. We then develop a life-cycle model that captures this absent-mindedness'. The model generates precautionary spending, whereby absent-minded agents tend to consume more than attentive ones. The model also predicts fluctuations over time in the level of attention, and thereby sheds new light on the sharp reduction in consumption both at retirement, and in cyclical downturns. Finally, we find patterns of attention in the data that are consistent with those predicted by the model.

Suggested Citation

  • John Ameriks & Andrew Caplin & John Leahy, 2004. "The Absent-Minded Consumer," NBER Working Papers 10216, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:10216
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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