Habit formation and long-run utility functions

This paper extends the work on habit formation of Pollak Habit formation and dynamic demand functions. J. Polit. Econ. (1970)] and provides a critical counterexample to a conjecture of von Weizsäcker Notes on endogenous changes of tastes, J. Econ. Theory (1971)] concerning the existence of a “long-run utility function.“ A linear specification of habit formation is applied to a general system of demand functions with linear Engel curves. It is shown that there exists a utility function which rationalizes the long-run demand functions if and only if they are the steady-state solution to a system of short-run demand functions generated by an additive utility function.