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A Note on the Interpretation of the Rational Addiction Model


  • Ferguson, B


The Rational Addiction Model of Becker and Murphy (1988) has become a standard tool in the analysis of the demand for drugs, cigarettes, alcohol and other potentially addictive goods. In this paper, we shall argue that the success of the model has been more apparent than real, and that its empirical implementation must be carefully reconsidered.

Suggested Citation

  • Ferguson, B, 1996. "A Note on the Interpretation of the Rational Addiction Model," Working Papers 1996-1, University of Guelph, Department of Economics and Finance.
  • Handle: RePEc:gue:guelph:1996-1

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    References listed on IDEAS

    1. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
    2. Alfons Weersink & Calum G. Turvey & Abdulahi Godah, 1990. "Decomposition Measures of Technical Efficiency for Ontario Dairy Farms," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 38(3), pages 439-456, November.
    3. Olson, Jerome A. & Schmidt, Peter & Waldman, Donald M., 1980. "A Monte Carlo study of estimators of stochastic frontier production functions," Journal of Econometrics, Elsevier, vol. 13(1), pages 67-82, May.
    4. Kopp, Raymond J. & Mullahy, John, 1990. "Moment-based estimation and testing of stochastic frontier models," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 165-183.
    5. Greene, William H., 1990. "A Gamma-distributed stochastic frontier model," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 141-163.
    6. Schmidt, Peter & Sickles, Robin C, 1984. "Production Frontiers and Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(4), pages 367-374, October.
    7. Seiford, Lawrence M. & Thrall, Robert M., 1990. "Recent developments in DEA : The mathematical programming approach to frontier analysis," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 7-38.
    8. Fan, Yanqin & Li, Qi & Weersink, Alfons, 1996. "Semiparametric Estimation of Stochastic Production Frontier Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(4), pages 460-468, October.
    9. Aigner, D J & Amemiya, Takeshi & Poirier, Dale J, 1976. "On the Estimation of Production Frontiers: Maximum Likelihood Estimation of the Parameters of a Discontinuous Density Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(2), pages 377-396, June.
    10. Lewin, Arie Y. & Knox Lovell, C. A., 1990. "Editor's introduction," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 3-5.
    11. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
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    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth


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