Optimal consumption choice with intolerance for declining standard of living

No 394, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University

Abstract: 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.

Keywords: Non-time separable utility; Intertemporal consumption choice; Habit formation (search for similar items in EconPapers)
Date: 2011-08-15
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https://pub.uni-bielefeld.de/download/2315664/2319829 First Version, 2007 (application/pdf)

Related works:
Journal Article: Optimal consumption choice with intolerance for declining standard of living (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:bie:wpaper:394

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