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Habit Formation (habit + formation)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	90%

Distribution within Business, Economics, Finance and Accounting

General & Introductory Economics	20%

Selected Abstracts

WHY ARE AMERICANS ADDICTED TO BASEBALL?

CONTEMPORARY ECONOMIC POLICY, Issue 1 2008
AN EMPIRICAL ANALYSIS OF FANDOM IN KOREA AND THE UNITED STATES
Theories of rational addiction posit that certain habit-forming goods,characterized by an increasing marginal utility of consumption,generate predictable dynamic patterns of consumer behavior. It has been suggested that attendance at sporting events represents an example of such a good, as evidenced by the pricing strategies of commercial sports interests. In this essay, we provide new evidence in support of rational addiction for the case of Major League Baseball but fail to find such support in data from the Korean Professional Baseball League. We then review the scientific literature on sports fans from the perspective of human behavioral ecology and propose a theory of endogenous habit formation among sports fans that could explain our findings. (JEL C32, D83, D87, D91, L83) [source]

The Saving Gateway: Implications for Optimal Saving,

FISCAL STUDIES, Issue 2 2010
Matthew D. Rablen
D91; H30 Abstract The Saving Gateway is a government saving initiative aiming to ,kick-start a saving habit among people on lower incomes'. Funds saved in a Saving Gateway account up to a monthly limit are matched by the government after two years at a rate of £0.50 per £1 saved. In this paper, a Saving Gateway account is embedded alongside an ordinary interest-bearing account in a simple life-cycle model of saving to assess the implications of the scheme for optimal saving. Among the findings are that, for agents with access to credit, the Saving Gateway is associated with a fall in saving during the life of the account and a rise in consumption. However, the scheme increases saving by the credit-constrained. On their own, empirically plausible levels of habit formation in consumption preferences have too small an effect on saving to justify the scheme. [source]

Resuscitating the C-CAPM: empirical evidence from France and Germany

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 4 2005
Stuart Hyde
Abstract In this paper we analyse whether the consumption based capital asset pricing model is consistent with asset return data from the French and German stock markets. We evaluate the performance of the C-CAPM by applying the non-parametric methodology of Hansen and Jagannathan and adopting five alternative specifications of utility. In addition to standard power utility we adopt the recursive preferences model proposed by Epstein and Zin. We also consider both internal and external habit formation (persistence) using the models proposed by Constantinides, Abel and Campbell and Cochrane. We evaluate our findings using the tests of Burnside and Hansen and Jagannathan. We find that the majority of models produce stochastic discount factors consistent with the data. However, high degrees of risk aversion are implied for the models to be consistent. Incorporating habit formation only partially reduces the implied levels of risk aversion. Copyright © 2005 John Wiley & Sons, Ltd. [source]

Land of addicts? an empirical investigation of habit-based asset pricing models

JOURNAL OF APPLIED ECONOMETRICS, Issue 7 2009
Xiaohong Chen
This paper studies the ability of a general class of habit-based asset pricing models to match the conditional moment restrictions implied by asset pricing theory. We treat the functional form of the habit as unknown, and estimate it along with the rest of the model's finite dimensional parameters. Using quarterly data on consumption growth, assets returns and instruments, our empirical results indicate that the estimated habit function is nonlinear, that habit formation is better described as internal rather than external, and the estimated time-preference parameter and the power utility parameter are sensible. In addition, the estimated habit function generates a positive stochastic discount factor (SDF) proxy and performs well in explaining cross-sectional stock return data. We find that an internal habit SDF proxy can explain a cross-section of size and book-market sorted portfolio equity returns better than (i) the Fama and French (1993) three-factor model, (ii) the Lettau and Ludvigson (2001b) scaled consumption CAPM model, (iii) an external habit SDF proxy, (iv) the classic CAPM, and (v) the classic consumption CAPM. Copyright © 2009 John Wiley & Sons, Ltd. [source]

Party loyalty as habit formation

JOURNAL OF APPLIED ECONOMETRICS, Issue 3 2003
Ron Shachar
In most democracies, at least two out of any three individuals vote for the same party in sequential elections. This paper presents a model in which vote-persistence is partly due to the dependence of the utility on the previous voting decision. This dependence is termed ,habit formation'. The model and its implications are supported by individual-level panel data on the presidential elections in the USA in 1972 and 1976. For example, it is found that the voting probability is a function of the lagged choice variable, even when the endogeneity of the lagged variable is accounted for, and that the tendency to vote for different parties in sequential elections decreased with the age of the voter. Furthermore, using structural estimation the effect of habit is estimated, while allowing unobserved differences among respondents. The structural habit parameter implies that the effect of previous votes on the current decision is quite strong. The habit model fits the data better than the traditional ,party identification' model. Copyright © 2003 John Wiley & Sons, Ltd. [source]

Valuing food-borne risks using time-series data: The case of E. coli O157:H7 and BSE crises in Japan

AGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 2 2006
Shunji Oniki
This study evaluates changes in consumers' concerns on food safety after the outbreaks of E. coli O157 and bovine spongiform encephalopathy (BSE) in Japan using household consumption time-series data. A food demand system for Japanese households is estimated using the linear approximate almost-ideal demand system (AIDS) model to evaluate the willingness to accept (WTA) compensation for risk. The Kalman filtering method is applied to produce estimates without a priori assumption regarding timing of the changes. The WTA value rises immediately after a food safety crisis occurs and declines in a short time. However, it does not return to previous levels for an extended period. A possible explanation for remaining effects of a crisis might be that they are the results of habit formation and learning effects of consumption. [EconLit citations: D12, D18, Q13]. © 2006 Wiley Periodicals, Inc. Agribusiness 22: 219,232, 2006. [source]

The perceived importance of veal meat attributes in consumer choice decisions

AGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 3 2001
Gale E. West
Animal scientists have recently found a way to produce extremely pale grain-fed veal, thus achieving high quality grade, while averting concerns over unethical treatment and medication residues in milk-fed veal production. Consumers, however, may reject pale cuts of veal labeled as "grain-fed." This article uses questionnaire data from six groceries in the province of Quebec, Canada, to investigate frequency of veal purchases and perceived importance of price, color, and production type as determinants of veal purchases. Consumers do not appear to have clear preferences for milk-fed veal characteristics. Frequency of consumption and importance of veal meat attributes were influenced more by variables of habit formation than by price, income, or education. The veal industry might be advised to encourage consumption of veal as a means to diversify consumers' meat menu. [Econ-Lit citations: D120, Q130] © 2001 John Wiley & Sons, Inc. [source]

Optimal dynamic pricing for sports games with habitual attendance

MANAGERIAL AND DECISION ECONOMICS, Issue 8 2008
Dong C. Won
This paper provides a theoretical analysis of the optimal pricing decisions of a sports team that maximizes lifetime profits in sports markets where game attendance is habit-forming for sports fans. The long-run equilibrium price and attendance level are found to be greater than the counterparts of the static framework, respectively. The infinite horizon model shows that the pricing strategy of the firm brings about an upward-crossing of two different dynamic price paths where the price path with stronger habit formation initially stays below, catches up, and ultimately rises above the price path with weaker habit formation. It is worth noting that the upward-crossing phenomenon is not fully understood in a finite-period model. Copyright © 2008 John Wiley & Sons, Ltd. [source]

Does Voting History Matter?

AMERICAN JOURNAL OF POLITICAL SCIENCE, Issue 1 2009
Analysing Persistence in Turnout
Individuals who vote in one election are more likely to vote in the next. Yet modelling the causal relationship between past and current voting decisions is intrinsically difficult, as this positive association can exist due to habit formation or unobserved heterogeneity. This article overcomes this problem using longitudinal data from the British National Child Development Study (NCDS) to examine voter turnout across three elections. It distinguishes between unobserved heterogeneity caused by fixed individual characteristics and the initial conditions problem, which occurs when voting behavior in a previous, but unobserved, period influences current voting behavior. It finds that, controlling for fixed effects, unobserved heterogeneity has little impact on the estimated degree of habit in voter turnout; however, failing to control for initial conditions reduces the estimate by a half. The results imply that voting in one election increases the probability of voting in a subsequent election by 13%. [source]

Hypothetical Intertemporal Consumption Choices*

THE ECONOMIC JOURNAL, Issue 486 2003
Arie Kapteyn
The paper extends and replicates part of the analysis by Barsky et al. (1997), which exploits hypothetical choices among different consumption streams to infer intertemporal substitution elasticities and rates of time preference. We use a new and much larger dataset than Barsky et al. Furthermore, we estimate structural models of intertemporal choice, while parameterising the parameters of interest as a function of relevant individual characteristics. We also consider ,behavioural' extensions, like habit formation. Models with habit formation appear to be superior to models with intertemporally additive preferences. [source]