Addiction and The Role of Commitment Devices
AbstractThis paper studies if external commitment devices are effectively capable of helping agents to reduce their consumption of addictive goods (alcohol, cigarettes, drugs, fatty foods etc.). The main assumption introduced in the model is that individuals are sophisticated hyperbolic discounters. The model shows that making easier the access to such instruments has ambiguous effects on individuals' welfare. First, hyperbolic agents purchase commitment devices less often that they wish to. Second, once the device has been purchased, consumption of addictive goods does not necessarily decrease. In particular, for mild level of addiction, commitment devices effectively reduce consumption and improve health status. However, for severe level of addiction, the consumption of the sin good increases, and the availability of commitment devices worsens the addictive problem. Finally, policy implications are derived.
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Bibliographic InfoPaper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 267.
Date of creation: 10 Dec 2010
Date of revision:
Addiction; Commitment; Hyperbolic Discounting;
Find related papers by JEL classification:
- A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
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