@techreport{NBERw15427,
title = "Adaptive Consumption Behavior",
author = "Peter Howitt and Ömer Özak",
institution = "National Bureau of Economic Research",
type = "Working Paper",
series = "Working Paper Series",
number = "15427",
year = "2009",
month = "October",
doi = {10.3386/w15427},
URL = "http://www.nber.org/papers/w15427",
abstract = {This paper proposes and studies a theory of adaptive consumption behavior under income uncertainty and liquidity constraints. We assume that consumption is governed by a linear function of wealth, whose coefficients are revised each period by a procedure, which, although sophisticated, places few informational or computational demands on the consumer. We show that under a variety of settings, our procedure converges quickly to a set of coefficients with low welfare cost relative to a fully optimal nonlinear consumption function.},
}