Journal of Economic Perspectives: Vol. 15 No. 3 (Summer 2001)


Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter


JEP - All Issues

The Hyperbolic Consumption Model: Calibration, Simulation, and Empirical Evaluation

Article Citation

Angeletos, George-Marios, David Laibson, Andrea Repetto, Jeremy Tobacman, and Stephen Weinberg. 2001. "The Hyperbolic Consumption Model: Calibration, Simulation, and Empirical Evaluation." Journal of Economic Perspectives, 15(3): 47-68.

DOI: 10.1257/jep.15.3.47


Laboratory and field studies of time preference find that discount rates are much greater in the short run than in the long run. Hyperbolic discount functions capture this property. This paper presents simulations of the savings and asset allocation choices of households with hyperbolic preferences. The behavior of the hyperbolic households is compared to the behavior of exponential households. The hyperbolic households borrow much more frequently in the revolving credit market. The hyperbolic households exhibit greater consumption income comovement and experience a greater drop in consumption around retirement. The hyperbolic simulations match observed consumption and balance sheet data much better than the exponential simulations.

Article Full-Text Access

Full-text Article (Complimentary)


Angeletos, George-Marios (MIT)
Laibson, David (Harvard U)
Repetto, Andrea (U of Chile)
Tobacman, Jeremy (Harvard U)
Weinberg, Stephen (Harvard U)

JEL Classifications

D91: Intertemporal Consumer Choice; Life Cycle Models and Saving
E21: Macroeconomics: Consumption; Saving; Wealth


View Comments on This Article (0) | Login to post a comment

Journal of Economic Perspectives

Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)


JEP - All Issues

Virtual Field Journals

AEA Member Login:

AEAweb | AEA Journals | Contact Us