Modelling addicitive consumption: Some theoretical and econometric issues
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1997-06
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Abstract
This paper addresses some theoretical and econometric aspects of modelling addictive consumption. We show that the solution to the optimization problem leads to a specification of the reduced from equation which is different from what is found in the literature. We also demonstrate that it is valid to apply OLS to estimate this reduced from equation and those used in the literature although the underlying variables are integrated.
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Addicitive consumption, Econometric issues