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Foundations of Intrinsic Habit Formation
Author(s) -
Rozen Kareen
Publication year - 2010
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.3982/ecta7302
Subject(s) - habit , economics , mathematical economics , psychology , social psychology
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.