Rational Addiction Research Articles

Habit Formation and Rational Addiction: A Field Experiment in Handwashing

We test the main predictions of the rational addiction model, reconceptualized as rational habit formation, in the context of handwashing. To track habit formation, we design soap dispensers with timed sensors. We test for rational habit formation by informing some households about a future change in the returns to daily handwashing. Child weight and height increase for all households with dispensers. Monitoring and incentives raise handwashing contemporaneously, and effects persist well after they end. Anticipation of future monitoring further raises handwashing: individuals internalize handwashing's habitual nature and accumulate stock. Our results inform policy design around the adoption of healthy behaviors.

The Welfare Implications of Addictive Substances: A Longitudinal Study of Life Satisfaction of Drug Users

This paper provides an empirical test of the rational addiction model, used in economics to model individuals' consumption of addictive substances, versus the utility misprediction model, used in psychology to explain the discrepancy between people's decision and their subsequent experiences. By exploiting a unique data set of disadvantaged Australians, we provide longitudinal evidence that a drop in life satisfaction tends to precede the use of illegal/street drugs. We also find that the abuse of alcohol, the daily use of cannabis and the weekly use of illegal/street drugs in the past 6 months relate to lower current levels of life satisfaction. This provides empirical support for the utility misprediction model. Further, we find that the decrease in life satisfaction following the consumption of illegal/street drugs persists 6 months to a year after use. In contrast, the consumption of cigarettes is unrelated to life satisfaction in the close past or the near future. Our results, though only illustrative, suggest that measures of individual's subjective wellbeing should be examined together with data on revealed preferences when testing models of rational decision-making.

Is the Rational Addiction model inherently impossible to estimate?

The Rational Addiction (RA) model is increasingly often estimated using individual level panel data with mixed results; in particular, with regard to the implied rate of time discount. This paper suggests that the odd values of the rate of discount frequently found in the literature may in fact be a consequence of the saddle-point dynamics associated with individual level inter-temporal optimization problems. We report the results of Monte Carlo experiments estimating RA-type difference equations that seem to suggest the possibility that the presence of both a stable and an unstable root in the dynamic process may create serious problems for the estimation of RA equations.

Modelling body weight, dieting and obesity traps

Abstract This paper presents a theoretical investigation into why losing weight is so difficult even in the absence of rational addiction, time-inconsistent preferences or bounded rationality. We add to the existing literature by focusing on the role that individual metabolism has on weight loss. The results from the theoretical model provide multiple steady states and a threshold revealing a situation of “obesity traps” that the individual must surpass in order to successfully lose weight. Any weight-loss efforts that the individual undertakes have to surpass such threshold in order to result in permanent weight loss, otherwise the individual will gradually regain weight and converge to his or her previous body weight.

Questioning rationality: the case for risk consumption

The standard assumption of rational, forward looking behavior has been heavily questioned given the impossibility of understanding some risk consumption behaviors within such a framework. The Becker and Murphy theory of rational addiction made a start on this debate fostering new refinements within the original rational theory framework as well as promising approaches based on the latest developments of cognitive science.This paper makes an overview confronting two main approaches highlighting their different time preferences assumptions. On the one hand the debate assumes rationality even in extreme situations of risk consumption - addictive behavior. On the other, new developments in the explanation of habits and addictive behaviours take an economic-psychological approach into consideration and have substantially different policy implications.

Habituation to atrocity: low-level violence against civilians as a predictor of high-level attacks

ABSTRACT‘Habituation to atrocity’ is characterized as an actor’s increased willingness to carry out high-level violence against civilians (VAC) owing to the choice of low-level attacks in an earlier period. We theoretically analyse habituation to atrocity using a rational choice model in which a government, rebel organization or militia group allocates resources to fighting, attacking civilians and identity formation to achieve territorial control. Based upon concepts available in the rational addiction literature, the model generates a demand function for VAC in which substantial additional demand arises owing to the ‘bad habit’ generated by previous atrocities. The model guides our empirical inquiry into VAC for a sample of forty-nine African countries over the period 1997 to 2014. We find that the number of past low-level civilian attacks (even sometimes those involving zero fatalities) significantly affects the number of high-level attacks in the present. We also find that previous low-level civilian attacks sometimes better predict high-level attacks than civil conflict. Our work suggests that regional and global datasets on ‘small’ VAC incidents can serve as valuable early warning indicators of more severe atrocities.

Pseudo panel data estimation technique and rational addiction model: an analysis of cigarette, alcohol and coffee demands

AbstractWe use a pseudo‐panel data approach to analyze the relationship between the consumptions of cigarettes, alcohol, and coffee in a rational addiction framework. We find that while cigarette and coffee demands fit well with the rational addiction model, alcohol demand conforms to a model with inventory effects. The results suggest that alcohol consumption increases the marginal utility derived from consumption of cigarettes. Increasing alcohol prices would decrease not only the consumption of alcohol, but also the consumption of cigarettes. On the other hand, increasing cigarette prices do not have the same effect on consumption of alcohol. The cross‐price elasticity of coffee with respect to cigarette price is positive and significant which suggests that coffee substitutes for cigarettes when cigarette prices increase. The cross‐price elasticity of alcohol with respect to coffee price is found to be negative and significant. On the other hand, Morishima elasticities of substitution indicate that cigarette, alcohol and coffee substitute each other along the indifference curve when relative prices change.

Excessive Dependence on Mobile Social Apps: A Rational Addiction Perspective

Drawing on the rational addiction framework, this study explores the digital vulnerabilities driven by excessive dependence on mobile social apps (e.g., SNS and social games). Rational addicts anticipate the future consequences of their current behaviors and attempt to maximize utility from their intertemporal consumption choices. Conversely, myopic addicts tend toward immediate gratification and fail to fully recognize the future harmful consequences of their current consumption. In lieu of conducting self-report surveys or aggregate-level demand estimation, this research examines addictive behaviors on the basis of consumption quantity at an individual level. To empirically validate rational addiction in the context of social app consumption, we collect and analyze 13-month, individual-level panel data on the weekly app usage of thousands of smartphone users. Results indicate that the average social app user conducts herself in a forward-looking manner and rationally adjusts consumption over time to derive optimal utility. The subgroup analysis, however, indicates that substantial variations in addictiveness and forward-looking propensities exist across demographically diverse groups. For example, addictive behaviors toward SNSs are more myopic in nature among older, less-educated, high-income groups. Additionally, type of social app moderates the effects of demographic characteristics on the nature of addictive behaviors. We provide valuable implications that policymakers can use to effectively manage mobile addiction problems, with the recommendations focusing on asymmetric social policies (e.g., information- and capacity-enhancing measures).

Apports de la psychologie à l’analyse économique des comportements addictifs

Les comportements individuels sont un objet d’étude commun à l’économie et à la psychologie. Le propos est d’identifier les apports potentiels de cette dernière à la théorie économique dans le domaine des comportements addictifs et ce, afin de pallier les limites des modèles actuels essentiellement issus de la théorie de l’addiction rationnelle. La prise en compte d’une polyphasie cognitive chez l’individu, ainsi que du rôle de ses émotions et de son identité sociale dans un modèle économique, permettent également d’élargir l’éventail des politiques publiques préconisées, qui se limitaient auparavant à des hausses de prix et à une limitation des externalités.

Excessive Dependence on Mobile Social Apps: A Rational Addiction Perspective

Drawing on the rational addiction framework, this study explores the digital vulnerabilities driven by dependence on mobile social apps (e.g., social network sites and social games). Rational addicts anticipate the future consequences of their current behaviors and attempt to maximize utility from their intertemporal consumption choices. Conversely, myopic addicts tend toward immediate gratification and fail to fully recognize the future consequences of their current consumption. In lieu of conducting self-report surveys or aggregate-level demand estimation, this research examines addictive behaviors on the basis of consumption quantity at an individual level. To empirically validate rational addiction in the context of social app consumption, we collect and analyze 13-month, individual-level panel data on the weekly app usage of thousands of smartphone users. Results indicate that the average social app user conducts herself in a forward-looking manner and rationally adjusts consumption over time to derive optimal utility. The subgroup analysis, however, indicates that substantial variations in addictiveness and forward-looking propensities exist across demographically diverse groups. For example, addictive behaviors toward social network sites are more myopic in nature among older, less-educated, high-income groups. Additionally, the type of social app moderates the effects of demographic characteristics on the nature of addictive behaviors. We provide implications that policymakers can use to effectively manage mobile addiction problems, with the recommendations focusing on asymmetric social policies (e.g., information- and capacity-enhancing measures).

Looking at the Taxation Effect on Cross-State Smuggling Using Rational Addiction Models

Looking at the Taxation Effect on Cross-State Smuggling Using Rational Addiction Models

A Dynamic Model of Health, Education, and Wealth with Credit Constraints and Rational Addiction

This paper develops and structurally estimates a life-cycle model where health, education, and wealth are endogenous accumulated processes depending on the history of an individual's optimal behaviors, on parental factors, and on cognitive and noncognitive abilities. The model investigates different pathways between education, health, and wealth by introducing endogenous human capital production, health production, and addictive preferences of unhealthy behavior in the presence of credit constraints. The effects of education on health include both the direct benefits of improving health production efficiency and the indirect benefits of reducing unhealthy behavior and raising earnings. Using data from National Longitudinal Survey of Youth 97, we estimate the model using a two-step estimation procedure based on factor analysis and simulated method of moments. Using estimated model, we quantify the relative importance of socioeconomic determinants of human capital inequality and health inequality. We also use to model to conduct counterfactual policy experiments.

Body Weight, Dieting and Obesity Traps

This paper presents a theoretical investigation into why losing weight is so difficult even in the absence of rational addiction, time-inconsistent preferences or bounded rationality. We add to the existing literature by focusing on the role that individual metabolism has on weight loss. The results from the theoretical model provides multiple steady states and a threshold revealing a situation of ''obesity traps that the individual must surpass in order to successfully lose weight. Given such a threshold we investigate if a short-run incentive scheme for weight loss is able to promote persistent weight-losses and what features an incentive scheme should have in order to sustain permanent weight loss. We find that a lump-sum incentive scheme is not always able to lead the individual to permanent weight loss. On the contrary, a non-decreasing incentive scheme with rewards for weight loss according to levels of body weight (i.e. progressive), is able to sustain a steady state reduction in body weight and food consumption.

How do smoking bans in restaurants affect restaurant and at-home alcohol consumption?

In this paper, we analyze the impact of smoking bans on restaurant and at-home alcohol consumptions in a rational addiction model using a pseudo-panel data approach. Cigarette consumption, restaurant alcohol consumption and at-home alcohol consumption fit well with the rational addiction model. Our results suggest that cigarettes and alcohol reinforce each other in consumption, but consumers increase restaurant alcohol consumption when cigarette prices increase. We find that smoking bans increase restaurant alcohol consumption, but decrease at-home alcohol consumption. After a smoking ban is imposed, nonsmokers are likely to stay longer at restaurants and consume more alcohol. On the other hand, when smokers are not allowed to smoke in restaurants, they are likely to compensate for it by increasing restaurant alcohol consumption. As smoking bans increase social drinking habits, a decrease in at-home alcohol consumption is observed. Our results suggest that smoking bans in restaurants or bars must be accompanied by decreased blood alcohol concentration limits and increased road controls so that negative externalities such as fatalities due to drunk driving can be avoided.

Frequency of museum attendance: motivation matters

Some recent empirical contributions have highlighted that tourists often go to museums yet appear to extract little utility from the experience. We argue that this is often the case with agents who visit museums only while on holiday and results from a temporary lack of substitute experience goods or compliance with a must-do list. If such agents behaved according to Stigler and Becker’s rational addiction theory, they would also visit museums while at home. However, most do not, which makes them constantly occasional consumers. We indirectly test for the presence of constantly occasional museum attendance by tourists, using data from a survey conducted in 2012 at Vittoriale, the most popular museum at Lake Garda, a renowned Italian tourist destination. By applying multiple correspondence analysis to a question on motivations to visit the museum, we obtain two dimensions of motivation: one based on a search for knowledge and the other based on a more recreational attitude. Identification of the latter is a new finding in itself. We include these dimensions as regressors in a model used to explain museum attendance. We find, as expected, that light consumption negatively affects attendance. We therefore argue that empirical analyses of museum attendance should not disregard light motivation as a possible driver.

A Dynamic Model of Rational Addiction: Evaluating Cigarette Taxes

Addiction creates an intertemporal link between a consumer’s past and present decisions, altering their responsiveness to price changes relative to nonaddictive products. We construct a dynamic model of rational addiction and endogenous consumption to investigate how consumers respond to policy interventions that aim to reduce purchases of cigarettes. We find that, on average, the category elasticity is about 35% higher when the model correctly accounts for addiction. However, some policies spur substitution from more expensive single packs to less expensive cartons of cigarettes, resulting in higher overall consumption for some consumers.

Rational addiction and cultural goods: the case of the Italian theatregoer

This paper tests whether demand for theatre in Italy is consistent with the model of rational addiction presented in Becker and Murphy (J Polit Econ 96(4):675–700, 1988). Data from a novel 34-year panel on regional annual theatre attendance are used to estimate market demand. Four models are applied to investigate the demand function, and all of these also include per capita income and other control variables as regressors. The first two models are estimated to check whether theatregoers are myopically addicted to theatre. The results suggest that the theatre is an addictive good because past consumption (and prices) significantly raises the marginal utility of current consumption. The third model tests the rational addiction hypothesis, which assumes that future attendance also influences current attendance, whilst past and future prices influence current attendance only indirectly through their impact on past and future attendances. However, our most highly specified model, introducing past and future prices, demonstrates that Italian theatregoers are not myopic but fully rational as outlined in Becker and Murphy (1988). The results demonstrate that the rational addiction hypothesis is applicable not only to “harmful” addictions such as alcohol, cigarettes and drug consumption, but also to “beneficial” addictions, such as theatre attendance. This result has important policy implications because theatre is one of the most subsidised performing arts in Italy; if theatregoers are fully rational, policy makers can influence theatre attendance using alternative policy instruments (price and income), thereby reducing government expenditure on theatre subsidies.

An Empirical Examination of the “Vicious Cycle” of Facebook Addiction

The use of some hedonic information systems (IS) can be addictive and lead to addiction-like symptoms. This study seeks to examine the “vicious cycle” in such situations, i.e., the ways in which past growth of hedonic system use facilitate the development of one's current level of addiction, which in turn drives further system use. These links are explicated using the theories of rational addiction and neural incentive sensitization. The resultant model is then tested with structural equation modeling (SEM) techniques applied to data collected at two points in time from 284 Facebook users. The findings suggest that increases in hedonic IS activity over the past three months facilitate the development of higher levels of technology-related addiction at time 1 (t1), which in turn influences five dimensions of system use at time 2 (t2). These include general use frequency, active use frequency, use duration, usage comprehensiveness, and access device heterogeneity.

Social values and economic dynamics

Social values/belief systems can be viewed as a stock of non-productive ideas that are collectively shared in a non-rivalrous way and evolve through experience/participation at the aggregate social level. While they are separate from the stock of scientific ideas that are essential to production, history shows that social values and scientific ideas are interdependent. This paper explores the relationship between social values and long-run growth in an endogenous growth framework and highlights the underlying mechanism. We view both scientific ideas and social values as some sort of social capital that accumulates through a society׳s aggregate experience and also as goods that generate utility flows with “rational addiction” or “habit formation” at the social level when combined with individuals’ time investment (learning-by-doing). We demonstrate the mechanism through which social values affect long-run economic growth. In particular, (i) we derive the conditions under which either the economy grows with social values as in the usual modern economies or it is dominated by social values with economic distress; and (ii) finally we show the applicability of the model to some episodes.

Smoking, Drinking, Never Thinking of Tomorrow: Income and Risky Choices Amongst Young Adults in the UK

In this paper we look at the relationship between health and income as mediated by “lifestyle” choices; that is, a set of behaviours which are thought to influence health and are generally considered to invoke a substantial degree of free choice. The main underlying assumption is that individuals are co-producers of their own health. We first present a theoretical model in which health affects a consumer's utility through a Health Production Function in which health is the output and consumer goods are the inputs. We then estimate an empirical model of health related choices and outcomes. We find that there are substantial differences between the permanent and transitory income determinants – also in terms of the direction of the effects. Moreover, we find that income effects often differ significantly in size and sometimes sign according to whether the income change was positive or negative. This is attributed to the dependence creating nature of the consumption goods involved (smoking cigarettes and drinking alcohol) and their role as anxiety reducing goods which suggests that the simple theoretical model outlined here – some form of which is usually employed to analyse these issues - is not fully adequate to deal with the type of lifestyle consumption goods considered here. We indicate the lines along which a model needs to be developed in order to take this more fully into account, based on the rational addiction approach originating with Becker.