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Quantile regression analysis of the rational addiction model: investigating heterogeneity in forward‐looking behavior

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  • Audrey Laporte
  • Alfia Karimova
  • Brian Ferguson

Abstract

The time path of consumption from a rational addiction (RA) model contains information about an individual's tendency to be forward looking. In this paper, we use quantile regression (QR) techniques to investigate whether the tendency to be forward looking varies systematically with the level of consumption of cigarettes. Using panel data, we find that the forward‐looking effect is strongest relative to the addiction effect in the lower quantiles of cigarette consumption, and that the forward‐looking effect declines and the addiction effect increases as we move toward the upper quantiles. The results indicate that QR can be used to illuminate the heterogeneity in individuals' tendency to be forward looking even after controlling for factors such as education. QR also gives useful information about the differential impact of policy variables, most notably workplace smoking restrictions, on light and heavy smokers. Copyright © 2010 John Wiley & Sons, Ltd.

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  • Audrey Laporte & Alfia Karimova & Brian Ferguson, 2010. "Quantile regression analysis of the rational addiction model: investigating heterogeneity in forward‐looking behavior," Health Economics, John Wiley & Sons, Ltd., vol. 19(9), pages 1063-1074, September.
    • Handle: RePEc:wly:hlthec:v:19:y:2010:i:9:p:1063-1074
    DOI: 10.1002/hec.1647
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    References listed on IDEAS

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    Cited by:

    1. Aurélien Saussay, 2019. "Dynamic heterogeneity: rational habits and the heterogeneity of household responses to gasoline prices," SciencePo Working papers Main hal-03632598, HAL.
    2. Erik Nesson, 2012. "The Distributional Effects of Tobacco Control Policies On Adult Smoking Behavior," Working Papers 201207, Ball State University, Department of Economics, revised Jun 2012.
    3. Thomas Demuynck & Ewout Verriest, 2013. "I’Ll Never Forget My First Cigarette: A Revealed Preference Analysis Of The “Habits As Durables” Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(2), pages 717-738, May.
    4. Laporte, Audrey & Dass, Adrian Rohit & Ferguson, Brian S., 2017. "Is the Rational Addiction model inherently impossible to estimate?," Journal of Health Economics, Elsevier, vol. 54(C), pages 161-175.
    5. Erik Nesson, 2017. "Heterogeneity in Smokers' Responses to Tobacco Control Policies," Health Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 206-225, February.

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