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Type | Working Paper |
Scope | Discipline-based scholarship |
Title | Intertemporal Choice under Habit Formation |
Organization Unit | |
Authors |
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Language |
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Institution | University of Zurich |
Series Name | Working paper series / Institute for Empirical Research in Economics |
Number | No. 43 |
ISSN | 1424-0459 |
Date | 2000 |
Abstract Text | Many of the most important choices in people's lives have an inter-temporal dimension, i.e., these choices are associated with a flow of benefits or costs that accrue in the future. In addition, such choices are frequently habit- forming. Yet, little is known about habit-forming inter-temporal choice behavior. This paper reports the results of an inter-temporal choice experiment with habit-formation. Subjects' choices deviate systematically from individually optimal decisions in the direction of over consumption. This over- consumption is partly driven by loss avoidance, comparable to a real life situation in which addicted people consume addictive substances only in order to overpower withdrawal symptoms. Our results thus reject the theory of rational addiction. |
Official URL | http://www.econ.uzh.ch/wp.html |
PDF File | Download from ZORA |
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