Visibility Bias in the Transmission of Consumption Beliefs and Undersaving
We model visibility bias in the social transmission of consumption behavior. When consumption is more salient than non-consumption, people perceive that others are consuming heavily, and infer that future prospects are favorable. This increases aggregate consumption in a positive feedback loop. A distinctive implication is that disclosure policy interventions can ameliorate undersaving. In contrast with wealth-signaling models, information asymmetry about wealth reduces overconsumption. The model predicts that saving is influenced by social connectedness, observation biases, and demographic structure; and provides new insight into savings rates. These predictions are distinct from other common models of consumption distortions.
-
-
Copy CitationBing Han, David Hirshleifer, and Johan Walden, "Visibility Bias in the Transmission of Consumption Beliefs and Undersaving," NBER Working Paper 25566 (2019), https://doi.org/10.3386/w25566.
-
Published Versions
BING HAN & DAVID HIRSHLEIFER & JOHAN WALDEN, 2023. "Visibility Bias in the Transmission of Consumption Beliefs and Undersaving," The Journal of Finance, vol 78(3), pages 1647-1704. citation courtesy of