@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",
 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.},
}