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A Theory of Rational Addiction

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  • Gary S. Becker
  • Kevin M. Murphy

Abstract

The authors develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time. Strong addiction to a good requires a big effect of past consumption of the good on current consumption. Such powerful complementarities cause some steady states to be unstable. They are an important part of the authors' analysis be-cause even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid falls in consumption to abstention. Their theory also impies that "cold turkey" is used to end strong addictions, that addicts often go on binges, that addicts respond more to permanent than to temporary changes in prices of addictive goods, and that anxiety and tensions can precipitate an addiction. Copyright 1988 by University of Chicago Press.

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Bibliographic Info

Paper provided by Chicago - Center for Study of Economy and State in its series University of Chicago - George G. Stigler Center for Study of Economy and State with number 41.

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Date of creation: 1986
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Handle: RePEc:fth:chices:41

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Web page: http://research.chicagobooth.edu/economy/
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  1. What behavioral economics has to say about domestic violence
    by ? in Nudge blog on 2008-09-11 12:00:00
  2. Habit formation and the economic core
    by Matt Nolan in TVHE on 2012-07-03 21:27:01
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