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This paper shows that the combination of habit formation – present consumption creating additional consumption needs in the future – and myopia may explain why some retirees are forced to "unretire", i.e., unexpectedly return to work. It also shows that when myopia about habit formation leads to unretirement there is a case for government's intervention. In a first-best setting the optimal solution can be decentralized by a simple "Pigouvian" (paternalistic) consumption tax (along with suitable lump-sum taxes). In a second-best setting, when personalized lump-sum transfers are not available, consumption taxes may have conflicting paternalistic and redistributive effects. We study the design of consumption taxes in such a setting when myopic individuals differ in productivity.

This paper shows that the combination of habit formation – present consumption creating additional consumption needs in the future – and myopia may explain why some retirees are forced to "unretire", i.e., unexpectedly return to work. It also shows that when myopia about habit formation leads to unretirement there is a case for government's intervention. In a first-best setting the optimal solution can be decentralized by a simple "Pigouvian" (paternalistic) consumption tax (along with suitable lump-sum taxes). In a second-best setting, when personalized lump-sum transfers are not available, consumption taxes may have conflicting paternalistic and redistributive effects. We study the design of consumption taxes in such a setting when myopic individuals differ in productivity.

This paper shows that the combination of habit formation - present consumption creating additional consumption needs in the future - and myopia may explain why some retirees are forced to unretire, i.e., unexpectedly return to work. It also shows that when myopia about habit formation leads to unretirement there is a case for government's intervention. In a first-best setting the optimal solution can be decentralized by a simple Pigouvian (paternalistic) consumption tax (along with suitable lump-sum taxes). In a second-best setting, when personalized lump-sum transfers are not available, consumption taxes may have conflicting paternalistic and redistributive effects. We study the design of consumption taxes in such a setting when myopic individuals differ in productivity.

This paper shows that the combination of habit formation - present consumption creating additional consumption needs in the future - and myopia may explain why some retirees are forced to "unretire", i.e., unexpectedly return to work. It also shows that when myopia about habit formation leads to unretirement there is a case for government's intervention. In a first-best setting the optimal solution can be decentralized by a simple "Pigouvian" (paternalistic) consumption tax (along with suitable lump-sum taxes). In a second-best setting, when personalized lump-sum transfers are not available, consumption taxes may have conflicting paternalistic and redistributive effects. We study the design of consumption taxes in such a setting when myopic individuals differ in productivity.

The aim of this paper is to analyse the pricing behaviour of print media firms when consumption on reader markets is addictive or habituated. However,not only the reader but also the advertising market has to be considered by a publisher optimising profits.Because print media markets are highly concentrated a monopoly-monopoly model is built,where both markets are of monopolistic structure.Moreover,a monopoly-duopoly model is considered,where only the reader market is monopolistic but the advertising market is of duopolistic structure.To compare the results from the models regarding habit effects,simple static models are presented as a benchmark.

The aim of this paper is to analyse the pricing behaviour of print media firms when consumption on reader markets is addictive or habituated. However, not only the reader but also the advertising market has to be considered by a publisher optimising profits. Because print media markets are highly concentrated a monopoly-monopoly model is built, where both markets are of monopolistic structure. Moreover, a monopoly-duopoly model is considered, where only the reader market is monopolistic but the advertising market is of duopolistic structure. To compare the results from the models regarding habit effects, simple static models are presented as a benchmark.

AbstractThis article examines whether altruistic behavior is habit forming. The basic premise is that if engaging in altruistic behavior when young is a good predictor of such behavior in adulthood, then this is consistent with the notion that altruistic behavior is habit forming. Using U.S. data, we examine donations of both money and time and find that engaging in charitable behavior when young is a strong predictor of adult altruistic behavior, with all other things equal. A major issue in the interpretation of this result is that the correlation between youthful and adult altruistic behavior may be due to some third variable that affects both. Although it is impossible to rule out such a possibility, we are able to control for family influences that likely could affect lifetime attitudes toward altruism.

We study implications of habit formation for optimal taxation. First, we show that taxation problems with habit formation can be analyzed using dynamic programming techniques. Second, we derive optimal labor and savings wedges for habit formation preferences. We show that habit formation counteracts the conventional Mirrleesian distortions and calls for subsidies to labor supply and savings. We demonstrate that the theoretical results are quantitatively important: in a stylized life-cycle model, average labor and savings wedges fall by more than one third compared to time-separable references. Third, we exploit the analogy between habit formation and durable consumption to study the taxation of durable and nondurable commodities.

AbstractResearch has shown that first-time voting experiences affect subsequent voting behavior, with salient elections boosting subsequent turnout and non-salient ones suppressing it. We challenge this view. Following research on the context-dependent nature of habit formation, we argue that all elections should affect subsequent turnout in elections of the same type. Comparing individuals that differ only in how salient their first eligible election was (Presidential or Midterm), we find support for this expectation. Individuals are more likely to vote for, and be interested in, elections of the same type as their first voting experience. Leveraging voting age laws in the US, we also show that such laws affect subsequent participation by changing the type of election individuals are first eligible for.