Habit Formation and the Theory of Addiction

George Messinis

No 635, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: In the light of repeated rejections of the Hall (1978) version of life-cycle permanent income hypothesis and other empirical puzzles, the habit formation hypothesis has increased in popularity since the 1980s. However, existing formulations of habit persistence do not always perform well empirically. This paper pursues two objectives: (1) to outline the habit persistence hypothesis, and (ii) to review thetheory of addiction with a focus on issues of relevance to the theory of consumption.

Keywords: CONSUMPTION; DRUG ADDICTION (search for similar items in EconPapers)
JEL-codes: D1 D9 E2 (search for similar items in EconPapers)
Pages: 39 pages
Date: 1998
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Citations: View citations in EconPapers (14)

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Journal Article: Habit Formation and the Theory of Addiction (1999)
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