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....