Abstract

The aim of this paper is to present in a systematic and critical way the literature on habit forming preferences in order to understand the role played in these models by the hypothesis on individual rationality. Overall, the question raised is whether the possible causes of endogenous preference depend on the hypothesis concerning individual rationality and whether the idea of endogenous preferences is compatible with any of these hypotheses, or if, on the contrary, there is any extreme rationality hypothesis that undermine its content. In trying to answer these questions the most important myopic and rational habit forming models and the interpretation that the case base decision theory gives to the phenomena of changing preferences are analysed.