The goal of this paper is to analyze consumer demand in markets with large price uncertainty. We develop a demand model for goods that are subject to habit formation. We show that consumption plans of forward looking individuals depend not only on preferences and current period prices, but also...

Consumption of addictive goods is subject to habit formation. Forward-looking individuals must, therefore, be concerned about future prices when making current consumption decisions. We study prices for tobacco products based on a unique data set provided by the Bureau of Labor Statistics. Our...

We develop a demand model for goods that are subject to habit formation. We show that consumption plans of forward-looking individuals depend on preferences, current period prices, and individual beliefs about the evolution of future prices. Moreover, an increase in price uncertainty reduces...

We consider expectations of the form E[logy|x] = Σ_j=1-super-d α_j log x_j as a good starting point for a more general analysis. We show why this naturally leads to the following flexible functional form: E[y|x] = f(Σ_j=1-super-dh_j(x_j)), where f(ċ) and the h_j(ċ)'s are estimated by cubic splines....