I’LL NEVER FORGET MY FIRST CIGARETTE: A REVEALED PREFERENCE ANALYSIS OF THE “HABITS AS DURABLES” MODEL

Thomas Demuynck and Ewout Verriest

International Economic Review, 2013, vol. 54, issue 2, 717-738

Abstract: We provide a revealed preference analysis of the “habits as durables” model. This approach avoids the need to impose a functional form on the underlying utility function. We show that our characterization is testable by means of linear programming methods, and we demonstrate its practical usefulness by means of an application to cigarette consumption using a Spanish household consumption data set. We find that the “habits as durables” model has better empirical fit in terms of predictive success compared to the “short memory habits” and life cycle models.

Date: 2013
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Citations: View citations in EconPapers (18)

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https://doi.org/10.1111/iere.12012

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Working Paper: I'll never forget my first cigarette: A revealed preference analysis of the 'habits as durables' model (2013)
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