The Econometric SocietyEdited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262
Econometrica: Jul, 2010, Volume 78, Issue 4
https://doi.org/10.3982/ECTA7302
p. 1341-1373
Kareen Rozen
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.
This supplement contains additional results that combine with Lemmas 1-22 in Appendix A to prove Theorem 2, giving monotonicity properties of the period utility under Axiom GM.
