Habit Formation with Threshold Adjustment: Addiction May Imply Complex Dynamics

Gustav Feichtinger, Alexia Fürnkranz-Prskawetz, W Herold and P Zinner

Journal of Evolutionary Economics, 1995, vol. 5, issue 2, 157-72

Abstract: A time-discrete descriptive model of habit formation is presented. Addictive behaviour is damped by a threshold which adapts itself to the habit. This simple framework is able to explain periodic, quasi-periodic as well as chaotic consumption patterns of addictive consumers. It turns out that both a high adjustment rate and a steep consumption function favour complex (chaotic) patterns. Coauthors are A. Prskawetz, W. Herold, and P. Zimmer.

Date: 1995
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