Modelling addictive consumption: some theoretical and econometric issues
This note addresses some theoretical and econometric aspects of modelling addictive consumption. We show that the solution to the optimization problem leads to a specification of the reduced form equation which is different from what has been estimated in the literature. We also demonstrate that it is valid to apply OLS to estimate this reduced form equation and those used in the literature although the underlying variables are integrated.
Volume (Year): 6 (1999)
Issue (Month): 3 ()
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