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The Optimal Consumption and the Quitting of Harmful Addictive Goods

Author

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  • Wang Ruqu

    (Queen’s University)

Abstract

In this paper we study a model of rational consumption and quitting in the context of harmful addictive goods. We assume that a person has imperfect information about his ability to resist and terminate the addiction. We first characterize the optimal consumption path of a non-addicted person, along which his stock of the addictive substance is either always increasing (and thus addiction occurs stochastically), always decreasing, or always unchanged. We then characterize the optimal consumption path of an addicted person, along which he may attempt to quit the addiction for a period of time, and then resume his consumption if the attempt is unsuccessful. Finally, we remark on the issues of regret, multiple attempts to quit, and quitting programs.

Suggested Citation

  • Wang Ruqu, 2007. "The Optimal Consumption and the Quitting of Harmful Addictive Goods," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-38, February.
    • Handle: RePEc:bpj:bejeap:v:7:y:2007:i:1:n:15
    DOI: 10.2202/1935-1682.1684
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    Cited by:

    1. O'Donoghue, Ted & Rabin, Matthew, 2002. "Addiction and Present-Biased Preferences," Working Papers 02-10, Cornell University, Center for Analytic Economics.
    2. Grignon, Michel, 2009. "An empirical investigation of heterogeneity in time preferences and smoking behaviors," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(5), pages 739-751, October.
    3. Strulik, Holger, 2018. "Smoking kills: An economic theory of addiction, health deficit accumulation, and longevity," Journal of Health Economics, Elsevier, vol. 62(C), pages 1-12.
    4. S. Nageeb Ali, 2011. "Learning Self-Control," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(2), pages 857-893.
    5. Lourdes Badillo Amador & Ángel López Nicolás, 2013. "Self-control and support for anti-smoking policies among smokers, ex smokers, and never smokers," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(2), pages 161-170, April.
    6. Chen, Yu-Fu & Petrie, Dennis, 2012. "When to Quit Under Uncertainty? A real options approach to smoking cessation," SIRE Discussion Papers 2012-79, Scottish Institute for Research in Economics (SIRE).
    7. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.

    More about this item

    Keywords

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    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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