Biased beliefs in dynamic decisions

Department(s)/ Research Infrastructure
Public Economics
Project Status
Current Project
Project Duration
since/from 2017 to 2020
Commissioned by
DFG/SFB
Funded by
DFG
In Cooperation with
Humboldt University Berlin
Project Manager
Georg Weizsäcker
Christoph Breunig
Project Team/Contacts at DIW Berlin

Details

Households face many dynamic decision problems where relevant market prices and budget constraints are realized only in the future. This makes optimal decision-making difficult as optimality requires an accurate quantification and interpretation of the dynamic processes operating in the market. The studies in this project elicit and test the households’ expectations about relevant future variables in competitive markets. We focus on two areas that arguably contain the most important sets of economic decisions in a household’s lifecycle: decisions in labor markets and decisions in markets for household finance products. In each case, we analyze the implications of biased beliefs about the relevant market prices on household behavior. We aim to enhance the existing analytical approaches by incorporating recent hypotheses from the behavioral economics literature, testing whether the standard, neoclassical approach suffices to explain the main data patterns, or whether the enhanced, behavioral-economics models are of significant quantitative relevance.


Publications

Monographien/ Sammelwerke extern (2017)

Entwicklung der Altersarmut bis 2036: Trends, Risikogruppen und Politikszenarien

Peter Haan, Holger Stichnoth, Maximilian Blömer, Hermann Buslei, Johannes Geyer, Garla Krolage, Kai-Uwe Müller