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Eliciting Preferences over Saving and Borrowing

Eliciting Preferences over Saving and Borrowing

Objective

Attitudes towards saving and borrowing are crucial to the understanding of individual financial behavior. An unwillingness to save or borrow can have severe economic implications, such as preventing optimal portfolio choice, insufficient retirement saving, or a failure to invest in profitable investment projects. To further the understanding of borrowing and saving behavior, I am proposing to develop an experimental protocol that allows to measure individual preferences over saving and borrowing. In particular, I will develop an intertemporal choice list, in which subjects can choose between different saving and debt contracts, using real monetary incentives. Subject’s decisions in this choice experiment can be used to infer individual differences in preferences over saving and borrowing. To control for confounds, and to identify how preferences over borrowing and saving interact with preferences over risk, time and losses, I will also elicit these preferences experimentally, and estimate all domains of preference jointly. For this purpose, I will write a formal model that extends cumulative prospect theory, to incorporate preferences over saving and borrowing. Along with the experiment, I plan to elicit a number of different novel survey measures regarding participants’ borrowing behavior and experience, and identify those that best predict behavior in the incentivized choice experiments. Identifying simple survey measures that explain preferences over saving and borrowing will be of help for future research on these preferences, where time and monetary constraints do not allow a fully incentivized experiment.
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Coordinator

UNIVERSITEIT MAASTRICHT

Address

Minderbroedersberg 4-6
6200 Md Maastricht

Netherlands

Activity type

Higher or Secondary Education Establishments

EU Contribution

€ 165 598,80

Project information

Grant agreement ID: 795958

Status

Ongoing project

  • Start date

    1 September 2018

  • End date

    31 August 2020

Funded under:

H2020-EU.1.3.2.

  • Overall budget:

    € 165 598,80

  • EU contribution

    € 165 598,80

Coordinated by:

UNIVERSITEIT MAASTRICHT

Netherlands