IDEAS home Printed from https://ideas.repec.org/p/osk/wpaper/0401r.html

Rational Addiction with Optimal Inventories: Theory and Evidence from Cigarette Purchases in Japan

Author

Listed:
  • Junmin Wan

    (Osaka School of International Public Policy, Osaka University)

Abstract

A rational addiction (RA) model with optimal inventories is developed and empirically tested. Consumers hoard addictive goods when they anticipate a future price increase. The optimal inventory period increases with the size of the price hike but decreases with inventory costs. The absolute value of the price elasticity of demand is smaller in the case of a price increase than in the case of a price decrease. Evidence from daily cigarette purchases in Japan is consistent with this asymmetric price effect. If inventories are ignored, monthly cigarette purchases reject the RA hypothesis inasmuch as inventories are an omitted variable correlated with price; but this hypothesis finds support if inventories are controlled for.

Suggested Citation

  • Junmin Wan, 2004. "Rational Addiction with Optimal Inventories: Theory and Evidence from Cigarette Purchases in Japan," Discussion Papers in Economics and Business 04-01-Rev, Osaka University, Graduate School of Economics, revised Feb 2006.
    • Handle: RePEc:osk:wpaper:0401r
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. is not listed on IDEAS
    2. Junmin Wan, 2004. "Consumption of Cigarettes, Nicotine, and Tar under Anti-smoking Policies: Japan as a Case Study," Discussion Papers in Economics and Business 04-12-Rev, Osaka University, Graduate School of Economics, revised Mar 2006.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:osk:wpaper:0401r. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: The Economic Society of Osaka University (email available below). General contact details of provider: https://edirc.repec.org/data/feosujp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.