An assumption on preferences such that utility at time t, u_t, is a function of the difference between present consumption, c_t, and consumption in the previous period, c_t−1, with some weight, u_t = u(c_t − γ‎c_t−1). The parameter γ‎ is interpreted as the intensity of habit formation. Under habit persistence an increase in current consumption lowers the marginal utility of present consumption and increases the marginal utility of next period consumption.