Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/89764 
Year of Publication: 
2013
Series/Report no.: 
CESifo Working Paper No. 4536
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
It has long been argued that the anticipations of some future event will impact current consumption and well-being in advance of the occurrence of the event itself. This paper introduces this idea of anticipated pleasure into the Ramsey growth model, by assuming that in addition to his own current consumption, an agent's current utility depends upon a reference consumption level that is based on expected future consumption. Two alternative specifications of the anticipated future consumption levels are considered: an external index and an internal index. We analyze the macrodynamic equilibrium, comparing it to both the standard Ramsey model, and the more familiar parallel model of habit formation. We establish a number of theoretical propositions characterizing the impact of the anticipated consumption reference on the transitional dynamics and long-run equilibrium, supplementing these with extensive numerical simulations.
Subjects: 
anticipated consumption
capital accumulation
JEL: 
D90
E20
Document Type: 
Working Paper
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