I incorporate expectations-based reference-dependent preferences into a dynamic stochastic model to explain three major life-cycle consumption facts; the intuitions behind these three implications constitute novel connections between recent advances in behavioral economics and prominent ideas in...

This paper analyzes sin goods consumption when individuals exhibit present-focused preferences. It considers three types of present focus: present-bias with varying degrees of naiveté, Gul-Pesendorfer preferences, and a dual-self approach. We investigate the incentives to deviate from healthy...

It is frequently assumed in several domains of economics that demand functions are invertible in prices. At the primitive level of preferences, however, the characterization of such demand functions remains elusive. We identify conditions on a utility-maximizing consumer's preferences that are...

This paper investigates the presence of habit formation in household consumption, using data from the Panel Study of Income Dynamics. We develop an econometric model of internal habit formation of the multiplicative specification. The restrictions of the model allow for classical measurement...

The standard continuous-time version of discounted utility does not possess the local inter-temporal substitution property (quantities consumed in nearby dates should be close substitutes, not complements), and hence does not define a continuous functional in the space of consumption paths. The...

We explore the dynamics of demand for n designs of a good when agents have preferences for (anti-)conformity. Agents differ in their social status and each agent seeks to imitate those of higher status and to distinguish herself from those of lower status, relative to her own status. In each...