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  • Open Daily: 10am - 10pm
    Alley-side Pickup: 10am - 7pm

    3038 Hennepin Ave Minneapolis, MN
    612-822-4611

Open Daily: 10am - 10pm | Alley-side Pickup: 10am - 7pm
3038 Hennepin Ave Minneapolis, MN
612-822-4611
Finance and Economics Discussion Series: Hyperbolic Discounting and Uniform Savings Floors

Finance and Economics Discussion Series: Hyperbolic Discounting and Uniform Savings Floors

Malin, Benjamin A.
United States Federal Reserve Board

Paperback

EconomicsInvesting & FinanceGeneral Political Science

ISBN10: 1296050262
ISBN13: 9781296050269
Publisher: Scholar's Choice
Published: Feb 16 2015
Pages: 34
Weight: 0.14
Height: 0.07 Width: 6.14 Depth: 9.21
Language: English

Previous research suggests that, in partial equilibrium, individuals whose decision-making exhibits a present-bias--such as hyperbolic discounters who tend to over-consume--will be in favor of having a floor imposed on their savings. In this paper, I show it is quite difficult for the introduction of a savings floor to be Pareto-improving in general equilibrium. Indeed, a necessary condition for the floor to be Pareto-improving is that it is high enough to be binding for all individuals. Even in that case, because the equilibrium interest rate is affected by the level of the savings floor, some individuals may prefer to commit to a future time path of consumption by facing a high interest rate (and no floor) rather than a high floor.

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