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arXiv · 2308.13470

Optimal Planning in Habit Formation Models with Multiple Goods

Mauro Bambi·Daria Ghilli·Fausto Gozzi·Marta Leocata
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Abstract

In this paper, on the line e.g. of [COW00]) we investigate a model with habit formation and two types of substitute goods. Such family of models, even in the case of 1 good, are difficult to study since their utility function is not concave in the interesting cases (see e.g. [BG20]), hence the first order conditions are not sufficient. We introduce and explain the model and provide some first results using the dynamic programming approach. Such results will form a solid ground over which a deep study of the features of the solutions can be performed.

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Mauro Bambi, Daria Ghilli, Fausto Gozzi, Marta Leocata. 2023-08-25. Optimal Planning in Habit Formation Models with Multiple Goods. https://arxiv.org/abs/2308.13470

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