Foundations of Intrinsic Habit Formation
We provide theoretical foundations for several common (nested) representations of intrinsic linear habit formation. Our axiomatization introduces an intertemporal theory of weaning a decision-maker from her habits using the device of compensation. We clarify differences across specifications of the model, provide measures of habit-forming tendencies, and suggest methods for axiomatizing time-nonseparable preferences.
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|Date of creation:||Mar 2008|
|Date of revision:||Mar 2009|
|Publication status:||Published in Econometrica, 2010|
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