Rethinking rational addictive behaviour and demand for cinema: a study using Japanese panel data

In this article, I explore the extent to which the rational addiction model developed by Becker and Murphy (1988) can account for cinema attendance, using panel data from 47 Japanese prefectures for the years 1994-1998. Controlling for unobserved prefecture-specific fixed effects and an endogeneity bias of the lagged and lead-dependent variables (the volume of cinema attendance), by using a fixed effect two-stage least squares estimation, I find that people in Japan are likely to be addictive. This finding is contrary to that found in the United Kingdom (Cameron, 1999). Further results suggest that the younger the people are, the more video is a favoured substitute for the cinema. If other factors are equal, the past accumulated consumption of young people is, of course, smaller than that of older people. Hence, the addictive behaviour is more attenuated for younger people because of their lesser past consumption. The complementary effect of past consumption is more likely to outweigh the substitution effect of preferring video as people become older. These findings are in accord with the Becker and Murphy (1988) model of rational addiction.