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Recursive Models of Dynamic Linear Economies$
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Lars Peter Hansen and Thomas J. Sargent

Print publication date: 2013

Print ISBN-13: 9780691042770

Published to Princeton Scholarship Online: October 2017

DOI: 10.23943/princeton/9780691042770.001.0001

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Canonical Household Technologies

Canonical Household Technologies

(p.191) Chapter 9 Canonical Household Technologies
Recursive Models of Dynamic Linear Economies

Lars Peter Hansen

Thomas J. Sargent

Princeton University Press

This chapter derives dynamic demand schedules from a household service technology. It applies the concept of canonical representation of household technologies to a version of Becker and Murphy's model of rational addiction. Canonical household technologies are useful for describing economies with heterogeneity among households' preferences because of how they align linear spaces consisting of histories of consumption services, on the one hand, and histories of consumption rates, on the other. The chapter sets the stage for the Chapter 10 use of demand curves to construct partial equilibrium interpretations of our models. It also sets the stage for the studies of aggregation of preferences in chapters 12 and 13.

Keywords:   household technologies, canonical representation, demand function, rational addiction model, consumption

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