The Absent-Minded Consumer

35 Pages Posted: 20 Jan 2004 Last revised: 2 Jun 2022

See all articles by John Ameriks

John Ameriks

The Vanguard Group, Inc.

Andrew Caplin

New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER)

John V. Leahy

New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 2004

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

Ameriks, John and Caplin, Andrew and Leahy, John V., The Absent-Minded Consumer (January 2004). NBER Working Paper No. w10216, Available at SSRN: https://ssrn.com/abstract=486220

John Ameriks

The Vanguard Group, Inc. ( email )

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Andrew Caplin (Contact Author)

New York University (NYU) - Department of Economics ( email )

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John V. Leahy

New York University (NYU) - Department of Economics ( email )

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HOME PAGE: http://www.nyu.edu/fas/Faculty/LeahyJohn.html

National Bureau of Economic Research (NBER)

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