Durable Consumption and Asset Management with Transaction and Observation Costs

$19.00 plus tax (Refund Policy)

Buy Article:

Abstract:

The empirical evidence on rational inattention lags the theoretical developments: micro evidence on one of the most immediate consequences of observation costs—the infrequent observation of state variables—is not available in standard datasets. We contribute to filling the gap using new household surveys. To match these data we modify existing models, shifting the focus from nondurable to durable consumption. The model features both observation and transaction costs and implies a mixture of timedependent and state-dependent rules. Numerical simulations explain the frequencies of trading and observation of the median investor with small observation costs and larger transaction costs.

Document Type: Short Communication

DOI: http://dx.doi.org/10.1257/aer.102.5.2272

Publication date: August 1, 2012

More about this publication?
Related content

Share Content

Access Key

Free Content
Free content
New Content
New content
Open Access Content
Open access content
Subscribed Content
Subscribed content
Free Trial Content
Free trial content
Cookie Policy
X
Cookie Policy
ingentaconnect website makes use of cookies so as to keep track of data that you have filled in. I am Happy with this Find out more