THE SIMPLE ANALYTICS OF HABIT FORMATION

Abstract

This paper simplifies and extends the literature on habit‐forming consumption. When addictive and nonaddictive goods are consumed, complements may become substitutes and normal nonaddictive goods may become inferior. Alternatively, when all goods are equally addictive, consumers favor goods with stable prices. Implications for product promotion and public policy are discussed.

Citation

Eisenhauer, J.G. (1996), "THE SIMPLE ANALYTICS OF HABIT FORMATION", Studies in Economics and Finance, Vol. 16 No. 2, pp. 3-21. https://doi.org/10.1108/eb028719