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A Model Of Addiction And Social Interactions

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  • Julian Reif

Abstract

Many consumer behaviors are both addictive and social. Understanding how these two phenomena interact informs basic models of human behavior, and matters for policymakers when the behavior is regulated. I develop a new model of demand that incorporates both addiction and social interactions and show that, under certain conditions, social interactions reinforce the effects of addiction. I also show how the dynamics introduced by addiction can solve the pernicious problem of identifying the causal effects of social interactions. I then use the model to illustrate a new and important identification problem for studies of social interactions: existing estimates cannot be used to draw welfare conclusions or even to deduce whether social interactions increase aggregate demand. Finally, I develop a method that allows researchers to distinguish between two common forms of social interactions and draw welfare conclusions. (JEL D11, H20)

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  • Julian Reif, 2019. "A Model Of Addiction And Social Interactions," Economic Inquiry, Western Economic Association International, vol. 57(2), pages 759-773, April.
    • Handle: RePEc:bla:ecinqu:v:57:y:2019:i:2:p:759-773
    DOI: 10.1111/ecin.12709
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    References listed on IDEAS

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    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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