HABIT PERSISTENCE, HETEROGENEOUS TASTES, AND IMPERFECT COMPETITION

We examine the dynamic behavior of consumption and price in a setting where imperfectly competitive producers face consumers with various in tensities of rational habit persistence. We establish that steady-stat e consumption and its persistence rate are lower under time-consistent monopoly than under either competition or monopoly commitment, Under both competition and monopoly commitment, the steady-state level and t he transient path of consumption are unaffected by the relative mix of consumer types. In the consistent case, both the persistence rate and steady-state consumption decrease as the proportion of habitual consu mers increases.