Advanced Search
MyIDEAS: Login

Rational Addiction with Optimal Inventories: Theory and Evidence from Cigarette Purchases in Japan

Contents:

Author Info

  • Junmin Wan

    ()
    (Osaka School of International Public Policy, Osaka University)

Registered author(s):

    Abstract

    A rational addiction (RA) model with optimal inventories is developed and empirically tested. Consumers hoard addictive goods when they anticipate a future price increase. The optimal inventory period increases with the size of the price hike but decreases with inventory costs. The absolute value of the price elasticity of demand is smaller in the case of a price increase than in the case of a price decrease. Evidence from daily cigarette purchases in Japan is consistent with this asymmetric price effect. If inventories are ignored, monthly cigarette purchases reject the RA hypothesis inasmuch as inventories are an omitted variable correlated with price; but this hypothesis finds support if inventories are controlled for.

    Download Info

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below under "Related research" whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Bibliographic Info

    Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 04-01-Rev.

    as in new window
    Length: 48 pages
    Date of creation: Jan 2004
    Date of revision: Feb 2006
    Handle: RePEc:osk:wpaper:0401r

    Contact details of provider:
    Email:
    Web page: http://www.econ.osaka-u.ac.jp/
    More information through EDIRC

    Related research

    Keywords: Enforcement; rational addiction; tax increase; hoarding; optimal stopping; asymmetric price effect; omitted variable;

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:osk:wpaper:0401r. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Atsuko SUZUKI).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.