Year: 2023
Type: article
Abstract: Tastes change over time. People’s tastes are distorted through two channels: satiation formation and habit formation. In this paper, we develop a theoretical foundation of satiation and habituation by an axiomatic approach. Our theory is based on a hierarchy of preference conditions called compensation independence. The behavioral assumption underlying the preference conditions are the psychological compensation of human beings. I flesh out an axiomatic system for general models of satiation and habit formation, which contains many functional forms in the literature as special cases. Moreover, I advance the axiomatization to accommodate the linear representations of satiation and habit formation that are prevailing in the literature. This paper contributes to the birth of a new generation of the behavioral foundation for modeling satiation and habit formation, which might improve on the current state of the art in understanding people’s tastes over time and preferences. Theoretically, this study contributes to the vein of time-nonseparable preferences.
Source: Mathematics
DOI: 10.3390/math11030542
Author: Junyi Chai
Language: English
Subfield: General Decision Sciences
Field: Decision Sciences
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $2,336
OpenAlex ID: W4317435909