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The Optimal Consumption and the Quitting of Harmful Addictive Goods

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Author Info
Ruqu Wang (Queen's University)

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Abstract

In this paper we study a model of rational consumption and quitting in the context of harmful addictive goods. We assume that a person has imperfect information about his ability to resist and terminate the addiction. We first characterize the optimal consumption path of a non-addicted person, along which his stock of the addictive substance is either always increasing (and thus addiction occurs stochastically), always decreasing, or always unchanged. We then characterize the optimal consumption path of an addicted person, along which he may attempt to quit the addiction for a period of time, and then resume his consumption if the attempt is unsuccessful. Finally, we remark on the issues of regret, multiple attempts to quit, and quitting programs.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Contributions to Economic Analysis & Policy.

Volume (Year): 7 (2007)
Issue (Month): 1 ()
Pages: 1684-1684
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Handle: RePEc:bep:eapcon:v:7:y:2007:i:1:p:1684-1684

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Related research
Keywords: rational addiction quitting harmful addiction imperfect information

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Find related papers by JEL classification:
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Drew Fudenberg & David K. Levine, 2006. "A Dual-Self Model of Impulse Control," American Economic Review, American Economic Association, vol. 96(5), pages 1449-1476, December. [Downloadable!]
    Other versions:
  2. Iannaccone, Laurence R., 1986. "Addiction and satiation," Economics Letters, Elsevier, vol. 21(1), pages 95-99. [Downloadable!] (restricted)
  3. Clazer, J. & Weiss, A., 1992. "Conflecting Preferences and Voluntary restrictions on Choices," Papers 8, Boston University - Department of Economics.
  4. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
  5. Brian S. Ferguson, 2000. "Interpreting the rational addiction model," Health Economics, John Wiley & Sons, Ltd., vol. 9(7), pages 587-598.
  6. Ted O'Donoghue & Matthew Rabin, 1999. "Doing It Now or Later," American Economic Review, American Economic Association, vol. 89(1), pages 103-124, March. [Downloadable!] (restricted)
  7. Pollak, Robert A., 1976. "Habit formation and long-run utility functions," Journal of Economic Theory, Elsevier, vol. 13(2), pages 272-297, October. [Downloadable!] (restricted)
  8. Akerlof, George A, 1991. "Procrastination and Obedience," American Economic Review, American Economic Association, vol. 81(2), pages 1-19, May.
  9. Spinnewyn, Frans, 1981. "Rational habit formation," European Economic Review, Elsevier, vol. 15(1), pages 91-109. [Downloadable!] (restricted)
  10. Becker, Gary S & Grossman, Michael & Murphy, Kevin M, 1991. "Rational Addiction and the Effect of Price on Consumption," American Economic Review, American Economic Association, vol. 81(2), pages 237-41, May. [Downloadable!] (restricted)
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  11. Leonard, Daniel, 1989. "Market behavior of rational addicts," Journal of Economic Psychology, Elsevier, vol. 10(1), pages 117-144, March. [Downloadable!] (restricted)
  12. Barthold, Thomas A & Hochman, Harold M, 1988. "Addiction as Extreme-Seeking," Economic Inquiry, Oxford University Press, vol. 26(1), pages 89-106, January.
  13. Dockner, Engelbert J & Feichtinger, Gustav, 1993. "Cyclical Consumption Patterns and Rational Addiction," American Economic Review, American Economic Association, vol. 83(1), pages 256-63, March. [Downloadable!] (restricted)
  14. Frank J. Chaloupka, 1991. "Rational Addictive Behavior and Cigarette Smoking," NBER Working Papers 3268, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Viscusi, W Kip, 1990. "Do Smokers Underestimate Risks?," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1253-69, December. [Downloadable!] (restricted)
  16. Becker, Gary S & Mulligan, Casey B, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 729-58, August.
  17. Winston, Gordon C., 1980. "Addiction and backsliding : A theory of compulsive consumption," Journal of Economic Behavior & Organization, Elsevier, vol. 1(4), pages 295-324, December. [Downloadable!] (restricted)
  18. Gavrila, C. & Feichtinger, G. & Tragler, G. & Hartl, R.F. & Kort, P.M., 2005. "History-dependence in a rational addiction model," Mathematical Social Sciences, Elsevier, vol. 49(3), pages 273-293, May. [Downloadable!] (restricted)
  19. Orphanides, Athanasios & Zervos, David, 1995. "Rational Addiction with Learning and Regret," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 739-58, August. [Downloadable!] (restricted)
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  20. Pollak, Robert A, 1970. "Habit Formation and Dynamic Demand Functions," Journal of Political Economy, University of Chicago Press, vol. 78(4), pages 745-63, Part I Ju. [Downloadable!] (restricted)
  21. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ted O'Donoghue & Matthew Rabin, 2002. "Addiction and Present-Biased Preferences," Department of Economics, Working Paper Series 1041, Department of Economics, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
  2. Ted O'Donoghue & Matthew Rabin, 2003. "Addiction and Present-Biased Preferences," Game Theory and Information 0303005, EconWPA. [Downloadable!]
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