Is Addiction "Rational"? Theory and Evidence Export

@article{citeulike:2626176, abstract = {This paper makes two contributions to the modeling of addiction. First, we provide new and convincing evidence that smokers are forward-looking in their smoking decisions, using state excise tax increases that have been legislatively enacted but are not yet effective, and monthly data on consumption. Second, we recognize the strong evidence that preferences with respect to smoking are time inconsistent, with individuals both not recognizing the true difficulty of quitting and searching for self-control devices to help them quit. We develop a new model of addictive behavior that takes as its starting point the standard \"rational addiction\" model, but incorporates time-inconsistent preferences. This model also exhibits forward-looking behavior, but it has strikingly different normative implications; in this case optimal government policy should depend not only on the externalities that smokers impose on others but also on the \"internalities\" imposed by smokers on themselves. We estimate that the optimal tax per pack of cigarettes should be at least one dollar higher under our formulation than in the rational addiction case.}, author = {Gruber, Jonathan and K\"{o}szegi, Botond}, citeulike-article-id = {2626176}, citeulike-linkout-0 = {http://www.jstor.org/stable/2696459}, journal = {The Quarterly Journal of Economics}, keywords = {addiction, rational\_addiction}, number = {4}, pages = {1261--1303}, posted-at = {2008-04-03 15:13:51}, priority = {0}, title = {Is Addiction \"Rational\"? Theory and Evidence}, url = {http://www.jstor.org/stable/2696459}, volume = {116}, year = {2001} }

TY - JOUR ID - citeulike:2626176 L3 - citeulike-article-id:2626176 N2 - This paper makes two contributions to the modeling of addiction. First, we provide new and convincing evidence that smokers are forward-looking in their smoking decisions, using state excise tax increases that have been legislatively enacted but are not yet effective, and monthly data on consumption. Second, we recognize the strong evidence that preferences with respect to smoking are time inconsistent, with individuals both not recognizing the true difficulty of quitting and searching for self-control devices to help them quit. We develop a new model of addictive behavior that takes as its starting point the standard "rational addiction" model, but incorporates time-inconsistent preferences. This model also exhibits forward-looking behavior, but it has strikingly different normative implications; in this case optimal government policy should depend not only on the externalities that smokers impose on others but also on the "internalities" imposed by smokers on themselves. We estimate that the optimal tax per pack of cigarettes should be at least one dollar higher under our formulation than in the rational addiction case. IS - 4 JF - The Quarterly Journal of Economics EP - 1303 TI - Is Addiction "Rational"? Theory and Evidence VL - 116 SP - 1261 KW - addiction KW - rational_addiction AU - Gruber, Jonathan AU - Köszegi, Botond PY - 2001/// UR - http://www.jstor.org/stable/2696459 ER -