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
Authors:	Riedel, Frank
Publisher:	Bielefeld : Bielefeld University, Institute of Mathematical Economics (IMW)
Subject:	Intertemporal consumption choice \| Habit formation \| Non-time separable utility

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Series:	Working Papers ; 394
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	584642342 [GVK] hdl:10419/43777 [Handle]
Classification:	D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving
Source:	EconStor

Persistent link: https://www.econbiz.de/10010272563