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Cigarette smoking and self-control

This paper empirically studies time inconsistent preferences in the context of cigarette smoking behavior. With hyperbolic discounting, an individual has time inconsistent preferences, which give rise to a lack of self-control, i.e., she may perpetually postpone the execution of a plan. This implies that a smoker who wants to quit has a demand for control devices, e.g., a smoking ban in public areas or a hike in cigarette excise taxes. This paper empirically tests this implication, using a sample that is based on survey data from Taiwan. The estimation results indicate that a smoker’s intention to quit has a positive effect on the smoker’s support for smoking bans and a cigarette excise tax increase. These results suggest that time inconsistent preferences are valid in the context of cigarette smoking behavior. This casts doubt on the validity of the assumption that individuals have time consistent preferences in Becker and Murphy’s (1988) rational addiction model.

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Paper provided by Institute of Economics, Academia Sinica, Taipei, Taiwan in its series IEAS Working Paper : academic research with number 06-A004.

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Length: 39 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:sin:wpaper:06-a004
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Web page: http://www.econ.sinica.edu.tw/index.php?foreLang=en
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  1. Bardsley, Peter & Olekalns, Nilss, 1999. "Cigarette and Tobacco Consumption: Have Anti-smoking Policies Made a Difference?," The Economic Record, The Economic Society of Australia, vol. 75(230), pages 225-40, September.
  2. Goldman, Steven M, 1980. "Consistent Plans," Review of Economic Studies, Wiley Blackwell, vol. 47(3), pages 533-37, April.
  3. Auld, M. Christopher & Grootendorst, Paul, 2004. "An empirical analysis of milk addiction," Journal of Health Economics, Elsevier, vol. 23(6), pages 1117-1133, November.
  4. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  5. Chee-Ruey Hsieh, 1998. "Health risk and the decision to quit smoking," Applied Economics, Taylor & Francis Journals, vol. 30(6), pages 795-804.
  6. O’Donoghue, Ted & Rabin, Matthew, 2002. "Addiction and Present-Biased Preferences," Department of Economics, Working Paper Series qt3v86x53j, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  7. W. Pesendorfer & F. Gul, 1999. "Temptation and Self-Control," Princeton Economic Theory Papers 99f1, Economics Department, Princeton University.
  8. Goldman, Steven Marc, 1979. "Intertemporally Inconsistent Preferences and the Rate of Consumption," Econometrica, Econometric Society, vol. 47(3), pages 621-26, May.
  9. Viscusi, W Kip, 1989. " Prospective Reference Theory: Toward an Explanation of the Paradoxes," Journal of Risk and Uncertainty, Springer, vol. 2(3), pages 235-63, September.
  10. Jones, Andrew M, 1989. "A Systems Approach to the Demand for Alcohol and Tobacco," Bulletin of Economic Research, Wiley Blackwell, vol. 41(2), pages 85-105, April.
  11. Ted O'Donoghue and Matthew Rabin ., 1997. "Doing It Now or Later," Economics Working Papers 97-253, University of California at Berkeley.
  12. Jonathan Gruber & Sendhil Mullainathan, 2002. "Do Cigarette Taxes Make Smokers Happier?," NBER Working Papers 8872, National Bureau of Economic Research, Inc.
  13. Chesney, Marc & Hazari, Bharat, 1998. "Irrational entry, rational exit," Journal of Mathematical Economics, Elsevier, vol. 29(1), pages 1-13, January.
  14. Chaloupka, Frank, 1991. "Rational Addictive Behavior and Cigarette Smoking," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 722-42, August.
  15. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  16. Wilde, Joachim, 2000. "Identification of multiple equation probit models with endogenous dummy regressors," Economics Letters, Elsevier, vol. 69(3), pages 309-312, December.
  17. Eugene M. Lewit & Douglas Coate, 1981. "The Potential for Using Excise Taxes to Reduce Smoking," NBER Working Papers 0764, National Bureau of Economic Research, Inc.
  18. Peleg, Bezalel & Yaari, Menahem E, 1973. "On the Existence of a Consistent Course of Action when Tastes are Changing," Review of Economic Studies, Wiley Blackwell, vol. 40(3), pages 391-401, July.
  19. H. M. Shefrin & Richard Thaler, 1977. "An Economic Theory of Self-Control," NBER Working Papers 0208, National Bureau of Economic Research, Inc.
  20. Gary S. Becker & Michael Grossman & Kevin M. Murphy, 1990. "An Empirical Analysis of Cigarette Addiction," NBER Working Papers 3322, National Bureau of Economic Research, Inc.
  21. 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.
  22. 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.
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  27. repec:bla:restud:v:74:y:2007:i:1:p:147-172 is not listed on IDEAS
  28. 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.
  29. Keeler, Theodore E. & Hu, Teh-Wei & Barnett, Paul G. & Manning, Williard G., 1993. "Taxation, regulation, and addiction: A demand function for cigarettes based on time-series evidence," Journal of Health Economics, Elsevier, vol. 12(1), pages 1-18, April.
  30. Baltagi, Badi H & Levin, Dan, 1986. "Estimating Dynamic Demand for Cigarettes Using Panel Data: The Effects of Bootlegging, Taxation and Advertising Reconsidered," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 148-55, February.
  31. 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.
  32. Faruk Gul & Wolfgang Pesendorfer, 2007. "Harmful Addiction," Review of Economic Studies, Oxford University Press, vol. 74(1), pages 147-172.
  33. Uri Benzion & Amnon Rapoport & Joseph Yagil, 1989. "Discount Rates Inferred from Decisions: An Experimental Study," Management Science, INFORMS, vol. 35(3), pages 270-284, March.
  34. Lowenstein, George & Prelec, Drazen, 1991. "Negative Time Preference," American Economic Review, American Economic Association, vol. 81(2), pages 347-52, May.
  35. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
  36. Jones, Andrew M., 1994. "Health, addiction, social interaction and the decision to quit smoking," Journal of Health Economics, Elsevier, vol. 13(1), pages 93-110, March.
  37. Rashad, Inas & Kaestner, Robert, 2004. "Teenage sex, drugs and alcohol use: problems identifying the cause of risky behaviors," Journal of Health Economics, Elsevier, vol. 23(3), pages 493-503, May.
  38. Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
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