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I just have a question, if you know an example where the consumers form a habit about their consumption in a perfect competition setup. I found this paper by Fuhrer, but it does not solve the it in a proper setup.

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  • $\begingroup$ There are many. You will find them under the keyword "habit formation". Also try "keeping up with the Joneses, Economics" for "external" habits. $\endgroup$ – BB King Oct 15 '15 at 17:50
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    $\begingroup$ As BB King (thanks God, there are still people loving blues !) said, there is a huge literature on habit formation. The seminal paper is Heal and Ryder (1973) Review of Economic Studies. You can access to the whole habit formation literature by just looking at the citations made on google scholar : scholar.google.fr/… $\endgroup$ – optimal control Oct 15 '15 at 19:07
  • $\begingroup$ Thank you already! I was wondering if there is already a textbook example that deals with it on a graduate school level! $\endgroup$ – OST_EE Oct 16 '15 at 16:58

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