Some foundations for multiplicative habits models

Ryoji Hiraguchi ()

Journal of Macroeconomics, 2008, vol. 30, issue 3, 873-884

Abstract: Consumption models with multiplicative habits are becoming increasingly popular. However, mathematical foundations of such models are incomplete because the utility function with multiplicative habits is not concave. This paper shows that an optimal consumption path exists and it satisfies the first order conditions. The paper also shows that when the production function is linear, consumption growth rate along the optimal path converges to a positive constant under several parametric restrictions.

Date: 2008
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Working Paper: Some Foundations for Multiplicative Habits Models (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:30:y:2008:i:3:p:873-884

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