Habits and empirical analysis of demand for six aggregate commodity groups in Greece

Abstract

In this paper using data form 1958 to 1989, the hypothesis of linear habit formation cannot be
rejected, indicating that tastes have not been constant in Greece. Food exhibits inventory depletion effect;
beverages and tobacco, footwear and clothing, settling and housing, and transportation and communication
exhibit habit persistence. By accounting for habits, food becomes more sensitive to both prices and
expenditure; while the opposite is true for settling and housing, and transportation and communication.
On the other hand, beverages and tobacco, and clothing and footwear become more price responsive but
less income sensitive when myopic formation is considered.