Myopia, regrets and risky behaviors
AbstractThis paper examines how a government should intervene when agents make, for different reasons, choices that have long term detrimental effects on their survival prospects. We consider an economy where some agents make risky choices (here sin good consumption) out of myopia, and regret their choices later on, whereas other agents make, because of their impatience, the same risky choices, which they never regret. We argue that, in the first-best, a government should only interfere with behaviors that agents regret, but not with other behaviors. In the second-best, asymmetric information and redistributive concerns imply interference not only with myopic behaviors, but also with impatience-based behaviors. Finally, we introduce heterogeneity in individual productivity, and show that the optimal tax on the sin good depends on the size of the myopic group, on the reactivity of sin good consumption to tax changes, and on the extent to which sin good consumption is correlated with labor earnings.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by HAL in its series Working Papers with number halshs-00566823.
Date of creation: Apr 2009
Date of revision:
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00566823
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/
self control ; risk taking ; optimal taxation ; sin goods ; myopia ; impatience ; regrets;
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.:
- Suranovic, Steven M. & Goldfarb, Robert S. & Leonard, Thomas C., 1999. "An economic theory of cigarette addiction," Journal of Health Economics, Elsevier, vol. 18(1), pages 1-29, January.
- Jonathan Gruber & Botond Koszegi, 2000. "Is Addiction "Rational"? Theory and Evidence," NBER Working Papers 7507, National Bureau of Economic Research, Inc.
- Eugene M. Lewit & Douglas Coate, 1983.
"The Potential for Using Excise Taxes to Reduce Smoking,"
NBER Working Papers
0764, National Bureau of Economic Research, Inc.
- Lewit, Eugene M. & Coate, Douglas, 1982. "The potential for using excise taxes to reduce smoking," Journal of Health Economics, Elsevier, vol. 1(2), pages 121-145, August.
- Athanasios Orphanides & David Zervos, 1992.
"Rational addiction with learning and regret,"
Finance and Economics Discussion Series
216, Board of Governors of the Federal Reserve System (U.S.).
- Chaloupka, Frank J. & Wechsler, Henry, 1997.
"Price, tobacco control policies and smoking among young adults,"
Journal of Health Economics,
Elsevier, vol. 16(3), pages 359-373, June.
- Frank J. Chaloupka & Henry Wechsler, 1995. "Price, Tobacco Control Policies and Smoking Among Young Adults," NBER Working Papers 5012, National Bureau of Economic Research, Inc.
- Michel Grignon, 2007. "Using Cigarette Taxes When Smokers Are Heterogeneous: Evidence on Hyperbolic Preferences, Endogenous Preferences, Smoking, and Price Elasticity of Smoking in France," Centre for Health Economics and Policy Analysis Working Paper Series 2007-10, Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).
If references are entirely missing, you can add them using this form.