Excerpt from Optimal Consumption and Portfolio Rules: With Durability and Local Substitution Two interesting economic notions are captured in two different interpretations of the model specified in (1) and In one interpretation, preferences given by (1) embody the idea of local substitution, that is consumptions at nearby dates are almost perfect substitutes. In a second interpretation, the model represents preferences over the service flows from irreversible purchases of a durable good that decays over time. Local substitution in continuous time, studied by Hindy, Huang and Kreps (1991) and Hindy and Huang is the notion that consumption at a point in time depresses marginal utility of consumption at nearby times. Suppression of appetite following a large meal is a natural phenomenon that leads to periodic consumption. In addition, local substitution implies that delaying or advancing consumption for a short period of time has little effect on satisfaction. In other words, agents regard consuming at adjacent dates as very similar alternatives. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.