Corrado, L. and Holly, S.

Multiplicative habit formation and consumption: a note

Economics Letters

Vol. 113(2) pp. 116-119 (2011)

Abstract: A multiplicative form of the habit term in the utility function has some undesirable properties if the habit function is itself still additive (Wendner, 2003). A geometric form for the way the stock of habit accumulates can resolve these shortcomings.

JEL Codes: D11, D12, D91

Author links: Sean Holly  

Publisher's Link: http://www.sciencedirect.com/science/article/pii/S0165176511002412