Multiplicative habit formation and consumption: A note

Luisa Corrado and Sean Holly

Economics Letters, 2011, vol. 113, issue 2, 116-119

Abstract: A multiplicative form of the habit term in the utility function has some undesirable properties if the habit function is itself still additive (Wendner, 2003). A geometric form for the way the stock of habit accumulates can resolve these shortcomings.

Keywords: Habit formation; Multiplicative habits; Consumption (search for similar items in EconPapers)
JEL-codes: D11 D12 D91 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:113:y:2011:i:2:p:116-119

DOI: 10.1016/j.econlet.2011.06.002

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