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Alcohol myopia and choice

Listed author(s):
  • Alejandro Tatsuo Moreno Okuno

    ()

    (Departamento de Economia y Finanzas. Universidad de Guanajuato)

  • Emiko Masaki

    (Asian Development Bank.)

Registered author(s):

    The aim of this paper is to develop a model that explains how the consumption of some addictive substances affects individuals’ choices and especially how it affects individuals’ risk taking. We do this by assuming that some addictives substances, specifically alcohol, increase individuals’ discount of the future. As individuals that consume alcohol show greater preference for the present and less for the future, they would find choices with rewards in the present and costs in the future more attractive. Therefore, an individual that wouldn’t have accepted an option may do so after consuming alcohol and he/she may regret his/her decision after the alcohol in his/her blood is eliminated. We analyze the effect of two taxes in the welfare of individuals that face an attractive but harmful choice: a tax on the consumption of alcohol and a tax (or penalty) if the future costs of the choice are realized.

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    Article provided by Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia. in its journal EconoQuantum, Revista de Economia y Negocios.

    Volume (Year): 10 (2013)
    Issue (Month): 2 (Julio - Diciembre)
    Pages: 35-54

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    Handle: RePEc:qua:journl:v:10:y:2013:i:2:p:35-54
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    Phone: 636 6270
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    Web page: http://econoquantum.cucea.udg.mx

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    1. Matthew Rabin & Ted O'Donoghue, 1999. "Doing It Now or Later," American Economic Review, American Economic Association, vol. 89(1), pages 103-124, March.
    2. Gary S. Becker & Casey B. Mulligan, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 729-758.
    3. Dockner, Engelbert J & Feichtinger, Gustav, 1993. "Cyclical Consumption Patterns and Rational Addiction," American Economic Review, American Economic Association, vol. 83(1), pages 256-263, March.
    4. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August.
    5. Gruber, Jonathan & Koszegi, Botond, 2004. "Tax incidence when individuals are time-inconsistent: the case of cigarette excise taxes," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1959-1987, August.
    6. B. Douglas Bernheim & Antonio Rangel, 2004. "Addiction and Cue-Triggered Decision Processes," American Economic Review, American Economic Association, vol. 94(5), pages 1558-1590, December.
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