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Habits as Adaptations: An Experimental Study

Author

Listed:
  • Ludmila Matyskova

    ()

  • Brian Rogers

    ()

  • Jakub Steiner

    ()

  • Keh-Kuan Sun

    ()

Abstract

Psychologists emphasize two aspects of habit formation: (i) habits arise when the history of a decision process correlates with optimal continuation actions, and (ii) habits alleviate cognition costs. We ask whether serial correlation of optimal actions alone induces habits or if habits form as optimal adaptations. We compare lab treatments that differ in the information provided to subjects, holding fixed the serial correlation of optimal actions. We find that past actions affect behavior only in the treatment in which this habit is useful. The result suggests that caution is warranted when modeling habits via a fixed utility over action sequences.

Suggested Citation

  • Ludmila Matyskova & Brian Rogers & Jakub Steiner & Keh-Kuan Sun, 2019. "Habits as Adaptations: An Experimental Study," CRC TR 224 Discussion Paper Series crctr224_2019_113, University of Bonn and University of Mannheim, Germany.
  • Handle: RePEc:bon:boncrc:crctr224_2019_113
    as

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    File URL: https://www.crctr224.de/en/research-output/discussion-papers/discussion-papers#DP113
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    References listed on IDEAS

    as
    1. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
    2. Abel, Andrew B, 1990. "Asset Prices under Habit Formation and Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 80(2), pages 38-42, May.
    3. Jakub Steiner & Colin Stewart & Filip Matějka, 2017. "Rational Inattention Dynamics: Inertia and Delay in Decision‐Making," Econometrica, Econometric Society, vol. 85, pages 521-553, March.
    4. Mel Win Khaw & Luminita Stevens & Michael Woodford, 2016. "Discrete Adjustment to a Changing Environment: Experimental Evidence," CESifo Working Paper Series 6273, CESifo Group Munich.
    5. repec:eee:moneco:v:91:y:2017:i:c:p:88-103 is not listed on IDEAS
    6. Andrew Caplin & Mark Dean, 2013. "Behavioral Implications of Rational Inattention with Shannon Entropy," NBER Working Papers 19318, National Bureau of Economic Research, Inc.
    7. Khaw, Mel Win & Stevens, Luminita & Woodford, Michael, 2017. "Discrete adjustment to a changing environment: Experimental evidence," Journal of Monetary Economics, Elsevier, vol. 91(C), pages 88-103.
    8. David Laibson, 2001. "A Cue-Theory of Consumption," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 81-119.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    habit formation; rational inattention;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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