Becker and Murphy (1988) constructed, in a well-known paper, a model of rational addiction in which people solve a dynamic optimization problem, choose an optimal timepath of drug consumption and thereby maximize lifetime utility. The model leads to the hypothesis that future consumption is a...

The question of whether alcohol and tobacco are consumed as complements or substitutes is crucial for determining the side-effects of anti-smoking policies. Numerous papers have empirically addressed this issue by estimating demand systems for alcohol and tobacco, and subsequently calculating...

The question of whether two drugs - namely alcohol and tobacco - are used as complements or substitutes is of crucial interest if side-effects of anti-smoking policies are considered. Numerous papers have empirically addressed this issue by estimating demand systems for alcohol and tobacco and...

The question of whether two drugs - namely alcohol and tobacco - are used as complements or substitutes is of crucial interest if side-effects of anti-drug policies are considered. Numerous papers have empirically addressed this issue by estimating demand systems for alcohol and tobacco and...

The question of whether two drugs - namely alcohol and tobacco - are used as complements or substitutes is of crucial interest if side-effects of anti-smoking policies are considered. Numerous papers have empirically addressed this issue by estimating demand systems for alcohol and tobacco and...

Economic theories of rational addiction aim to describe consumer behavior in the presence of habit-forming goods. We provide a biological foundation for this body of work by formally specifying conditions under which it is optimal to form a habit. We demonstrate the empirical validity of our...

This paper deals with one of the main empirical problems associated with the rational addiction theory, namely that its derived demand equation is not empirically distinguishable from models with forward looking behavior, but with time inconsistent preferences. The implication is that, even when...

The milk addiction paradox refers to an empirical finding in which commodities that are typically considered to be non addictive, such as milk, appear instead to be addictive. This result seems more likely when there is persistence in consumption and when using aggregate data, and it suggests...