Question: 2. Argue that the following phenomena are inconsistent with exponential discounting, and that they are consistent with hyperbolic discounting. (a) In a survey, households were

2. Argue that the following phenomena are inconsistent with exponential discounting, and that they are consistent with hyperbolic discounting.

(a) In a survey, households were asked (i) What percentage of your annual household income do you think you should save for retirement? and (ii) what percentage of your annual household income are you now saving for retirement? The median difference between the answers to questions (i) and (ii) was 10 percent of income and the mean difference was 11.1 percent of income.

(b) Average U.S. household consumption drops by about 35 percent from the year just before retirement to two years after retirement.

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