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In Vino Veritas: The Economics of Drinking

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  • Jan Heufer

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Abstract

It is argued that drug consumption, most commonly alcohol drinking, can be a technology to give up some control over one’s actions and words. It can be employed by trustworthy players to reveal their type. Similarly alcohol can function as a “social lubricant” and faciliate type revelation in conversations. It is shown that both separating and pooling equilibria can exist; as opposed to the classic results in the literature, a pooling equilibrium is still informative. Drugs which allow a gradual loss of control by appropriate doses and for which moderate consumption is not addictive are particularly suitable because the consumption can be easily observed and reciprocated and is unlikely to occur out of the social context. There is a tradeoff between the effi ciency gains due to the signaling eff ect and the loss of productivity associated with intoxication. Long run evolutionary equilibria of the type distribution are considered. If coordination on an exclusive technology is effi cient, social norms or laws can raise effi ciency by legalizing only one drug.

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Bibliographic Info

Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0158.

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Length: 25 pages
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:rwi:repape:0158

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Related research

Keywords: Asymmetric Information; Drinking; Drug Consumption; Signaling; Social Norms;

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References

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  1. Bradley J. Ruffle & Richard Sosis, 2007. "Does It Pay To Pray? Costly Ritual and Cooperation," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 18.
  2. Friedman, Daniel & Singh, Nirvikar, 2007. "Equilibrium Vengeance," MPRA Paper 4321, University Library of Munich, Germany.
  3. Tan, Jonathan H. W. & Vogel, Claudia, 2005. "Religion and trust: an experimental study," Discussion Papers 240, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
  4. Frank, Robert H, 1987. "If Homo Economicus Could Choose His Own Utility Function, Would He Want One with a Conscience?," American Economic Review, American Economic Association, vol. 77(4), pages 593-604, September.
  5. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. You are more trustworthy if you are drunk
    by Economic Logician in Economic Logic on 2010-04-28 14:01:00
  2. Visa vem du är genom alkohol
    by Niclas Berggren in Nonicoclolasos on 2010-05-08 09:38:06

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  1. Economic Logic blog

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