IDEAS home Printed from https://ideas.repec.org/a/bpj/bejeap/v7y2007i1n15.html
   My bibliography  Save this article

The Optimal Consumption and the Quitting of Harmful Addictive Goods

Author

Listed:
  • Wang Ruqu

    (Queen’s University)

Abstract

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.

Suggested Citation

  • Wang Ruqu, 2007. "The Optimal Consumption and the Quitting of Harmful Addictive Goods," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-38, February.
    • Handle: RePEc:bpj:bejeap:v:7:y:2007:i:1:n:15
    DOI: 10.2202/1935-1682.1684
    as

    Download full text from publisher

    File URL: https://doi.org/10.2202/1935-1682.1684
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.2202/1935-1682.1684?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Leonard, Daniel, 1989. "Market behavior of rational addicts," Journal of Economic Psychology, Elsevier, vol. 10(1), pages 117-144, March.
    2. Barthold, Thomas A & Hochman, Harold M, 1988. "Addiction as Extreme-Seeking," Economic Inquiry, Western Economic Association International, vol. 26(1), pages 89-106, January.
    3. Dockner, Engelbert J & Feichtinger, Gustav, 1993. "Cyclical Consumption Patterns and Rational Addiction," American Economic Review, American Economic Association, vol. 83(1), pages 256-263, March.
    4. Heal, Geoffrey M., 1993. "The optimal use of exhaustible resources," Handbook of Natural Resource and Energy Economics, in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 3, chapter 18, pages 855-880, Elsevier.
    5. Clazer, J. & Weiss, A., 1992. "Conflecting Preferences and Voluntary restrictions on Choices," Papers 8, Boston University - Department of Economics.
    6. Michaels, Robert J, 1988. "Addiction, Compulsion, and the Technology of Consumption," Economic Inquiry, Western Economic Association International, vol. 26(1), pages 75-88, January.
    7. Chaloupka, Frank, 1991. "Rational Addictive Behavior and Cigarette Smoking," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 722-742, August.
    8. Viscusi, W Kip, 1990. "Do Smokers Underestimate Risks?," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1253-1269, December.
    9. Partha Dasgupta & Geoffrey Heal, 1974. "The Optimal Depletion of Exhaustible Resources," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 3-28.
    10. Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521331586, September.
    11. Spinnewyn, Frans, 1981. "Rational habit formation," European Economic Review, Elsevier, vol. 15(1), pages 91-109.
    12. Akerlof, George A, 1991. "Procrastination and Obedience," American Economic Review, American Economic Association, vol. 81(2), pages 1-19, May.
    13. Orphanides, Athanasios & Zervos, David, 1995. "Rational Addiction with Learning and Regret," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 739-758, August.
    14. Bordley, Robert F., 1986. "Satiation and habit persistence (or the dieter's dilemma)," Journal of Economic Theory, Elsevier, vol. 38(1), pages 178-184, February.
    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 237-241, May.
    16. Iannaccone, Laurence R., 1986. "Addiction and satiation," Economics Letters, Elsevier, vol. 21(1), pages 95-99.
    17. 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.
    18. Pollak, Robert A, 1970. "Habit Formation and Dynamic Demand Functions," Journal of Political Economy, University of Chicago Press, vol. 78(4), pages 745-763, Part I Ju.
    19. 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.
    20. Pollak, Robert A., 1976. "Habit formation and long-run utility functions," Journal of Economic Theory, Elsevier, vol. 13(2), pages 272-297, October.
    21. SPINNEWYN, Frans, 1981. "Rational habit formation," LIDAM Reprints CORE 436, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    22. Unknown, 1986. "Letters," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 1(4), pages 1-9.
    23. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. 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.
    2. Grignon, Michel, 2009. "An empirical investigation of heterogeneity in time preferences and smoking behaviors," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(5), pages 739-751, October.
    3. Strulik, Holger, 2018. "Smoking kills: An economic theory of addiction, health deficit accumulation, and longevity," Journal of Health Economics, Elsevier, vol. 62(C), pages 1-12.
    4. S. Nageeb Ali, 2011. "Learning Self-Control," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(2), pages 857-893.
    5. Lourdes Badillo Amador & Ángel López Nicolás, 2013. "Self-control and support for anti-smoking policies among smokers, ex smokers, and never smokers," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(2), pages 161-170, April.
    6. 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.
    7. Chen, Yu-Fu & Petrie, Dennis, 2012. "When to Quit Under Uncertainty? A real options approach to smoking cessation," SIRE Discussion Papers 2012-79, Scottish Institute for Research in Economics (SIRE).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sophie Massin, 2011. "La notion d'addiction en économie : La théorie du choix rationnel à l'épreuve," Revue d'économie politique, Dalloz, vol. 121(5), pages 713-750.
    2. Champarnaud, Luc & Michel, Philippe, 2000. "Biens culturels, transmission de culture et croissance," L'Actualité Economique, Société Canadienne de Science Economique, vol. 76(4), pages 501-520, décembre.
    3. Jacobs Martin, 2016. "Accounting for Changing Tastes: Approaches to Explaining Unstable Individual Preferences," Review of Economics, De Gruyter, vol. 67(2), pages 121-183, August.
    4. Hae Kang Lee, 2024. "The financial benefits of health engagement programs to life insurers," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-38, December.
    5. Badi H. Baltagi & Ingo Geishecker, 2006. "Rational alcohol addiction: evidence from the Russian longitudinal monitoring survey," Health Economics, John Wiley & Sons, Ltd., vol. 15(9), pages 893-914, September.
    6. Zaifu Yang & Rong Zhang, 2014. "Rational Addictive Behavior under Uncertainty," Discussion Papers 14/12, Department of Economics, University of York.
    7. Robert Kaestner & Kevin Callison, 2018. "An Assessment of the Forward‐Looking Hypothesis of the Demand for Cigarettes," Southern Economic Journal, John Wiley & Sons, vol. 85(1), pages 48-70, July.
    8. Badi H. Baltagi & James M. Griffin, 2002. "Rational addiction to alcohol: panel data analysis of liquor consumption," Health Economics, John Wiley & Sons, Ltd., vol. 11(6), pages 485-491, September.
    9. Suranovic, Steven M. & Goldfarb, Robert S. & Leonard, Thomas C., 1999. "An economic theory of cigarette addiction," Journal of Health Economics, Elsevier, vol. 18(1), pages 1-29, January.
    10. Brian L. Goff & Robert D. Tollison, 1999. "The Market Provision of Addiction Control Services," Public Finance Review, , vol. 27(2), pages 115-137, March.
    11. Mezza, Alvaro & Buchinsky, Moshe, 2021. "Illegal drugs, education, and labor market outcomes," Journal of Econometrics, Elsevier, vol. 223(2), pages 454-484.
    12. Levy-Livermore, A., 1998. "Life-Expectancy Augmented Rational Addition: A Note," Economics Working Papers wp98-01, School of Economics, University of Wollongong, NSW, Australia.
    13. Fenn, Aju J. & Antonovitz, Frances, 1998. "The Impact Of Addiction Information On Cigarette Consumption," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20857, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    14. Dragone, Davide, 2009. "A rational eating model of binges, diets and obesity," Journal of Health Economics, Elsevier, vol. 28(4), pages 799-804, July.
    15. Xiaoou Liu & Rigoberto Lopez, 2012. "Evidence of rational addiction to carbonated soft drinks?," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 4(3), pages 300-317, August.
    16. Peter Arcidiacono, Holger Sieg, Frank Sloan, 2001. "Living Rationally Under the Volcano? Heavy Drinking and Smoking Among the Elderly," Computing in Economics and Finance 2001 207, Society for Computational Economics.
    17. Rosalie Liccardo Pacula, 1998. "Adolescent Alcohol and Marijuana Consumption: Is There Really a Gateway Effect?," NBER Working Papers 6348, National Bureau of Economic Research, Inc.
    18. David Aristei & Luca Pieroni, 2010. "Habits, Complementarities and Heterogeneity in Alcohol and Tobacco Demand: A Multivariate Dynamic Model," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(4), pages 428-457, August.
    19. Cameron, Dr. Samuel, 2000. "Nicotine addiction and cigarette consumption: a psycho-economic model," Journal of Economic Behavior & Organization, Elsevier, vol. 41(3), pages 211-219, March.
    20. Jonathan Klick & Thomas Stratmann, 2006. "Subsidizing Addiction: Do State Health Insurance Mandates Increase Alcohol Consumption?," The Journal of Legal Studies, University of Chicago Press, vol. 35(1), pages 175-198, January.

    More about this item

    Keywords

    rational addiction; quitting; harmful addiction; imperfect information;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

    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:bpj:bejeap:v:7:y:2007:i:1:n:15. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    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.