Habit Formation and the Theory of Addiction
AbstractIn the light of repeated rejections of the Hall (1978) version of the 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: (i) to outline the habit persistence hypothesis, and (ii) to review the theory of addiction with a focus on issues of relevance to the theory of consumption. In the literature on addiction, two research traditions are discernible: rational addiction and myopic addiction. The former approach emphasises forward-looking behaviour and defines memory loss as a univariate process. The latter relies on multiple objectives and highlights the role of contractual behaviour. The paper argues that future research in consumption with habits ought to pay more attention to non-separabilities, allow for multivariate processes when modelling memory loss and consider rational habit modification. Copyright 1999 by Blackwell Publishers Ltd
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Economic Surveys.
Volume (Year): 13 (1999)
Issue (Month): 4 (September)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0950-0804
Other versions of this item:
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
- D1 - Microeconomics - - Household Behavior
- D9 - Microeconomics - - Intertemporal Choice
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Koehne, Sebastian & Kuhn, Moritz, 2013. "Optimal capital taxation for time-nonseparable preferences," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79951, Verein für Socialpolitik / German Economic Association.
- Ronen Bar-El & Teresa García-Muñoz & Shoshana Neuman & Yossef Tobol, 2013.
"The evolution of secularization: cultural transmission, religion and fertility—theory, simulations and evidence,"
Journal of Population Economics,
Springer, vol. 26(3), pages 1129-1174, July.
- Ronen Bar-El & Teresa García-Muñoz & Shoshana Neuman & Yossef Tobol, 2010. "The Evolution of Secularization: Cultural Transmission, Religion and Fertility Theory, Simulations and Evidence," Working Papers 2010-10, Department of Economics, Bar-Ilan University.
- Ronen Bar-El & Teresa García-Muñoz & Shoshana Neuman & Yossef Tobol, 2010. "The Evolution of Secularization: Cultural Transmission, Religion and Fertility. Theory, Simulations and Evidence," Papers on Economics of Religion 10/03, Department of Economic Theory and Economic History of the University of Granada..
- Bar-El, Ronen & García Muñoz, Teresa & Neuman, Shoshana & Tobol, Yossi, 2010. "The Evolution of Secularization: Cultural Transmission, Religion and Fertility Theory, Simulations and Evidence," IZA Discussion Papers 4980, Institute for the Study of Labor (IZA).
- Henry, O. & Messinis, G. & Olekalns, N., 1999. "Rational Habit Modification: the Role of Credit," Department of Economics - Working Papers Series 729, The University of Melbourne.
- Stracca, Livio, 2004. "Behavioral finance and asset prices: Where do we stand?," Journal of Economic Psychology, Elsevier, vol. 25(3), pages 373-405, June.
- Koehne, Sebastian & Kuhn, Moritz, 2013.
"Optimal capital taxation for time-nonseparable preferences,"
45203, University Library of Munich, Germany.
- Moritz Kuhn & Sebastian Koehne, 2013. "Optimal capital taxation for time-nonseparable preferences," 2013 Meeting Papers 322, Society for Economic Dynamics.
- Luisa Corrado & Sean Holly, 2004.
" Habit Formation and Interest Rate Smoothing,"
CDMA Conference Paper Series
0404, Centre for Dynamic Macroeconomic Analysis.
- Ida, Takanori & Goto, Rei, 2009. "Interdependency among addictive behaviours and time/risk preferences: Discrete choice model analysis of smoking, drinking, and gambling," Journal of Economic Psychology, Elsevier, vol. 30(4), pages 608-621, August.
- Anne Bretteville-Jensen, 2006. "Drug Demand – Initiation, Continuation and Quitting," De Economist, Springer, vol. 154(4), pages 491-516, December.
- Sebastian Koehne & Moritz Kuhn, 2014. "Optimal Taxation in a Habit Formation Economy," CESifo Working Paper Series 4581, CESifo Group Munich.
- Emmanuel PETIT (GREThA UMR CNRS 5113), 2010. "The role of regret in the persistence of anomalies in financial markets (In French)," Cahiers du GREThA 2010-07, Groupe de Recherche en Economie Théorique et Appliquée.
- repec:ebl:ecbull:v:5:y:2006:i:17:p:1-4 is not listed on IDEAS
- Luca Bossi & Pere Gomis-Porqueras, 2006. "Deficit financing in overlapping generation economies with habit persistence," Economics Bulletin, AccessEcon, vol. 5(17), pages 1-4.
- Takanori Ida, 2012. "Impatience and Immediacy: A Quasi-Hyperbolic Discounting Approach to Smoking Behavior," Discussion papers e-11-010, Graduate School of Economics Project Center, Kyoto University.
- Wendner, Ronald, 2003. "Do habits raise consumption growth?," Research in Economics, Elsevier, vol. 57(2), pages 151-163, June.
- Luca Bossi & Vladimir Petkov, 2007. "Habits, Market Power, and Policy Selection," Working Papers 0702, University of Miami, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.