Precautionary Saving and Social Learning Across Generations: An Experiment

We use experimental methods to study how individuals solve life cycle 'precautionary savings' tasks. Some results resemble previous experimental work on dynamic optimisation tasks. Within our experiment, however, opportunities exist for subjects to learn from one another. Subjects participated in three-member 'families'. Second and third 'generation' subjects observe and/or communicate with their 'antecedent' first or second generation subject. We find that later generations perform significantly better than earlier generations. The results speak to questions concerning the precautionary model of consumption, the modelling of dynamic decision behaviour more generally, and the possible importance of social learning to individual decision-making. Copyright 2003 Royal Economic Society.

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