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Faculty of Economics

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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  

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