Additive habit formation: Consumption in incomplete markets with random endowments
Papers from arXiv.org
We provide a detailed characterization of the optimal consumption stream for the additive habit-forming utility maximization problem, in a framework of general discrete-time incomplete markets and random endowments. This characterization allows us to derive the monotonicity and concavity of the optimal consumption as a function of wealth, for several important classes of incomplete markets and preferences. These results yield a deeper understanding of the fine structure of the optimal consumption and provide a further theoretical support for the classical conjectures of Keynes (1936).
Date: 2011-06, Revised 2011-09
References: View complete reference list from CitEc
Citations View citations in EconPapers (3) Track citations by RSS feed
Published in Mathematics and Financial Economics 5(2), 67--99, 2011
Downloads: (external link)
http://arxiv.org/pdf/1106.2980 Latest version (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1106.2980
Access Statistics for this paper
More papers in Papers from arXiv.org
Series data maintained by arXiv administrators ().