Kelly, Clare, 1975- and Lanot, Gauthier (2002) Consumption patterns over pay periods. Working Paper. University of Warwick, Department of Economics, Coventry.

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Abstract

This paper establishes a theoretical framework to characterise the optimal behaviour of individuals who receive income periodically but make consumption decisions on a more frequent basis. The model incorporates price uncertainty and imperfect credit markets. The simulated numerical solution to this model shows that weekly consumption functions are ordered such that the functions within the payment period are highest in the first and the last week of the payment cycle for all wealth levels. Using weekly expenditure data from the FES, we estimate the coefficient of relative risk aversion (point estimates are between 1.2 and 7) and the extent of measurement error in the data (which accounts for approximately 60% of the variance in the data).

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HB Economic Theory
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Consumption (Economics) -- Mathematical models, Liquidity (Economics), Uncertainty, Credit cards, Finance, Personal
Series Name:	Warwick economic research papers
Publisher:	University of Warwick, Department of Economics
Place of Publication:	Coventry
Date:	November 2002
Number:	No.656
Number of Pages:	42
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
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URI:	http://wrap.warwick.ac.uk/id/eprint/1531

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