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Uncovering the Behavioral Implications of the Rational Addiction Assertion

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  • Caputo Michael R

    (Department of Economics, University of Central Florida, P.O. Box 161400, Orlando, FL 32816-1400, USA)

Abstract

The consumption functions in Becker and Murphy's (1988) rational addiction theory are subjected to an extensive comparative dynamics analysis. They are shown to be intrinsically characterized by a symmetric and positive semidefinite matrix of generalized Slutsky-like terms. In contrast, the typical comparative dynamics expressions, comprised of the individual partial derivatives of the consumption functions with respect to the parameters and state variables, do not possess refutable implications under the basic assumptions of the theory. Only with additional sufficiently strong assumptions, of which some are identified here, can they be signed.

Suggested Citation

  • Caputo Michael R, 2018. "Uncovering the Behavioral Implications of the Rational Addiction Assertion," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 18(1), pages 1-13, January.
    • Handle: RePEc:bpj:bejtec:v:18:y:2018:i:1:p:13:n:13
    DOI: 10.1515/bejte-2016-0120
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    References listed on IDEAS

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    1. M. Partovi & Michael Caputo, 2007. "Existence of a Universal Comparative Statics Matrix for Differentiable Optimization Problems," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(2), pages 385-394, February.
    2. M. Hossein Partovi & Michael R. Caputo, 2006. "A Complete Theory Of Comparative Statics For Differentiable Optimization Problems," Metroeconomica, Wiley Blackwell, vol. 57(1), pages 31-67, February.
    3. Jonathan Gruber & Botond Köszegi, 2001. "Is Addiction "Rational"? Theory and Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(4), pages 1261-1303.
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    1. Caputo, Michael R., 2021. "New insights in the canonical model of health capital," Mathematical Social Sciences, Elsevier, vol. 110(C), pages 23-33.

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    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
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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