An economic theory of cigarette addiction
Steven M. Suranovic a,) , Robert S. Goldfarb a , Thomas C. Leonard b a
Department of Economics, The George Washington UniÕersity, 2201 G St. N.W., Washington, DC 20052, USA b Department of Economics, Princeton UniÕersity, Princeton, USA Received 1 July 1996; revised 1 March 1998; accepted 30 April 1998
Abstract In this paper we present a model in which individuals act in their own best interest, to explain many behaviors associated with cigarette addiction. There are two key features of the model. First, there is an explicit representation of the withdrawal effects experienced when smokers attempt to quit smoking. Second, there is explicit recognition that the negative effects of smoking generally appear late in an individual’s life. Among the things we use the model to explain are: Ž1. how individuals can become trapped in their decision to smoke; Ž2. the conditions under which cold-turkey quitting and gradual quitting may occur; and Ž3. a reason for the existence of quit-smoking treatments. q 1999 Elsevier Science B.V. All rights reserved. JEL classification: I10; D11; D91 Keywords: Addiction; Smoking; Intertemporal choice; Habitual consumption
1. Introduction Economists model human behavior by assuming that individuals act in their own best interest. We describe agents as maximizing utility when they make rational choices consistent with their preferences, given their beliefs. Yet classes of widespread behaviors seem to prima facie contradict this assumption. Millions Corresponding email@example.com
0167-6296r99r$ - see front matter q 1999 Elsevier Science B.V. All rights reserved. PII: S 0 1 6 7 - 6 2 9 6 Ž 9 8 . 0 0 0 3 7 - X
S.M. SuranoÕic et al.r Journal of Health Economics 18 (1999) 1–29
of consumers smoke cigarettes, overindulge in food and drink, pay taxes too soon, procrastinate, and save or exercise too little. To the extent that these choices are not what people want, they present a puzzle for standard economic theory. An economic modeling answer to this puzzle is found in rational addiction models, which build on earlier analyses in which the individual’s past consumption patterns affect present choices Žsee, for example, Pollak, 1970, and Stigler and Becker, 1977.. In the addiction analysis of Becker and Murphy Ž1988. they assume that agents choose an overlife consumption path to maximize expected utility and show that addiction is consistent with rational behavior. Another theory of addiction is the ‘multiple selves’ approach that embodies competing preferences. In these models a smoker would have one ‘self’ who wants to smoke competing against her non-smoker ‘other self’. Žexamples of such approaches, not necessarily focusing on addiction, include Schelling, 1984 and Thaler and Shefrin, 1981.. In the medical literature it is sometimes suggested that addictions are ‘diseases’ arising out of biological predispositions. This approach places the choice about using addictive substances beyond the individual’s control. 1 Finally, psychologists sometimes describe addictions using ‘primrose path’ theories. In this view individuals are lured into addiction either because the latent costs are initially hidden or because of a faulty reasoning process. 2 In this paper we focus on one common addictive behavior—cigarette smoking. We present a model of cigarette consumption in which self-interested individuals choose to become addicted. The model incorporates many of the same elements from the Becker–Murphy rational addiction analysis. However, we reinterpret or re-characterize some of the effects. For example, the Becker–Murphy analysis suggests that potential addiction arises whenever consumption of a good displays adjacent complementarity. This implies that someone is addicted to a good only when past consumption of the good...