Ravn, Morten; Schmitt-Grohé, Stephanie; Uribe, Martín - In: Review of Economic Studies 73 (2006) 1, pp. 195-218
This paper generalizes the standard habit-formation model to an environment in which agents form habits over individual varieties of goods as opposed to over a composite consumption good. We refer to this preference specification as “deep habit formation”. Under deep habits, the demand...