Numerous studies have confirmed the importance of habit formation, as represented by a lagged dependent variable, in demand analysis. Although all work to date has been based on aggregate time series data, this study uses household level BLS Interview Panel data to test the habit hypothesis. An...

A neoclassical model of investment behavior is developed wherein firms are assumed to maximize the expected present value of net revenue under Leontief technology. Prices and yields are assumed to be stochastic. This framework yields investment as a function of the expected present value of the...