Optimal consumption choice with intolerance for declining standard of living

Duesenberry introduced the notion of a ratchet investor who does not tolerate any decline in her consumption rate. We connect the demand behavior of such an agent to the behavior of standard time-additive agents. A ratchet investor demands the running maximum of the optimal plan a conventional time-additive investor with lower initial wealth would choose.

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Year of publication:	2007-09
Authors:	Riedel, Frank
Institutions:	Institut für Mathematische Wirtschaftsforschung, Universität Bielefeld
Subject:	intertemporal consumption choice \| habit formation \| non-time separable utility

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Extent:	application/pdf
Series:	Working Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 394 14 pages
Classification:	D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005002262