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The Optimal Consumption and the Quitting of Harmful Addictive Goods

  • Ruqu Wang

    (Queen's University)

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.

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Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1122.

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Date of creation: 01 Aug 2000
Date of revision:
Handle: RePEc:ecm:wc2000:1122
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  1. Barthold, Thomas A & Hochman, Harold M, 1988. "Addiction as Extreme-Seeking," Economic Inquiry, Western Economic Association International, vol. 26(1), pages 89-106, January.
  2. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
  3. Orphanides, Athanasios & Zervos, David, 1995. "Rational Addiction with Learning and Regret," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 739-58, August.
  4. Iannaccone, Laurence R., 1986. "Addiction and satiation," Economics Letters, Elsevier, vol. 21(1), pages 95-99.
  5. Winston, Gordon C., 1980. "Addiction and backsliding : A theory of compulsive consumption," Journal of Economic Behavior & Organization, Elsevier, vol. 1(4), pages 295-324, December.
  6. Dockner, Engelbert J & Feichtinger, Gustav, 1993. "Cyclical Consumption Patterns and Rational Addiction," American Economic Review, American Economic Association, vol. 83(1), pages 256-63, March.
  7. Frank J. Chaloupka, 1990. "Rational Addictive Behavior and Cigarette Smoking," NBER Working Papers 3268, National Bureau of Economic Research, Inc.
  8. Pollak, Robert A, 1970. "Habit Formation and Dynamic Demand Functions," Journal of Political Economy, University of Chicago Press, vol. 78(4), pages 745-63, Part I Ju.
  9. 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.
  10. Pollak, Robert A., 1976. "Habit formation and long-run utility functions," Journal of Economic Theory, Elsevier, vol. 13(2), pages 272-297, October.
  11. Heal, G., 1990. "The Optimal Use Of Exhaustible Resources," Papers fb-_90-10, Columbia - Graduate School of Business.
  12. Viscusi, W Kip, 1990. "Do Smokers Underestimate Risks?," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1253-69, December.
  13. Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521331586, October.
  14. Leonard, Daniel, 1989. "Market behavior of rational addicts," Journal of Economic Psychology, Elsevier, vol. 10(1), pages 117-144, March.
  15. Becker, Gary S & Grossman, Michael & Murphy, Kevin M, 1991. "Rational Addiction and the Effect of Price on Consumption," American Economic Review, American Economic Association, vol. 81(2), pages 237-41, May.
  16. Spinnewyn, Frans, 1981. "Rational habit formation," European Economic Review, Elsevier, vol. 15(1), pages 91-109.
  17. Clazer, J. & Weiss, A., 1992. "Conflecting Preferences and Voluntary restrictions on Choices," Papers 8, Boston University - Department of Economics.
  18. Akerlof, George A, 1991. "Procrastination and Obedience," American Economic Review, American Economic Association, vol. 81(2), pages 1-19, May.
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