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Consumer Habit Persistence problem (35%). Consider the following innite horizon utility max imization problem. Notice that utility depends on both current consumption and previous period

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Consumer \"Habit Persistence\" problem (35%). Consider the following innite horizon utility max imization problem. Notice that utility depends on both current consumption and previous period consumption; The habit persistence parameter )1 shows how much of current consumption is inuenced by previous consumption patterns. max[Z,8' (Inc, + y In c,_1)] r=0 st (3, + k,\" g Alf, A > D, 0

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