Article Abstract:
An analysis of G.S. Becker and K.M. Murphy's theory of rational addiction was conducted. The theory proposed that the perspective of rational decision-making was also applicable to cases of addictive behavior. Data were collected from information provided by a group of active injecting addicts, a group that had previously misused illegal intoxicants and a group that claimed that they had never been misusers. Results indicate that active injectors of heroin and amphetamine have a higher discount rate than the group reporting that they had never been users. The findings raise the question of whether a high time-preference rate results in addiction or whether the onset of addiction changes people's inter-temporal equilibrium.
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Article Abstract:
An analysis of firm behavior when demand is linked over time was conducted. It was proven that in cases of forward-looking firms, anticipated future events can affect current consumption of an addictive good even when consumers are completely myopic. It was also demonstrated that a monopolist producing an intertemporal good might optimally price it at or below marginal cost for some period of time. Results demonstrate that the problem may lie in the prediction of price which indicates that supply considerations are important.
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Article Abstract:
An economic model that incorporates the role of quitting costs, withdrawal effects and adverse effects of smoking on future health was developed to analyze behaviors associated with cigarette addiction. Results show that the model can explain why smokers are unable to quit despite their desire to do so and how cold-turkey quitting is induced among smokers. Moreover, the model show that smokers tend to reduce their consumption only when costs rapidly increase.
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