David Bowman's research while affiliated with Board of Governors of the Federal Reserve System and other places
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Publications (2)
We propose a model of consumption and saving based on Kahneman and Tversky's Prospect Theory that implies a fundamental asymmetry in consumption behavior inconsistent with other models of consumption. When there is sufficient income uncertainty, a person resists lowering consumption in response to bad news about future income. This resistance is gr...
Psychological evidence indicates that a person's well-being depends not only on his current consumption of goods, but on a reference level determined by his past consumption. According to Kahneman and Tversky's (1979) prospect theory, people care much more about losses relative to their reference points than about gains, are riskÂ-averse over gain...
Citations
... Loss-aversion is both intuitively appealing and well supported in finance, economics, marketing, and organizational behaviour [5,6]. For example, there are economic field tests supporting lossaversion in financial markets [7], life savings and consumptions [8], labour supply [9], marketing [10], real estate [11], and organizational behaviour [12,13]. However, in most SC models, decision makers are assumed to be lossneutral, which maximizes the profit in an uncertain environment [14]. ...
... The sensitivity of consumption of agent L to a positive shock in aggregate income when consumption is adjusted upward is equal to c and the sensitivity to a negative shock when consumption is adjusted downward is equal toc. Since c <c, the sensitivity to a downward adjustment for agent L's consumption is higher than that for an upward adjustment, consistent with empirical evidence documented by Shea (1995), Bowman et al. (1999), Jappelli and Pistaferri (2014) ...
