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Addiction

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Abstract

Research on addiction had already yielded a wide range of interesting and important findings when economists first arrived on the scene. The economic study of addiction was initiated by a seminal paper by Becker and Murphy (1988) which challenged the prevailing view of addiction as self-destructive, proposing instead a ‘rational account of addiction’. Although some empirical research has confirmed the model’s critical prediction that anticipated increases in future prices will decrease current demand for a drug, more recent research by economists, stimulated by the prior work from other disciplines, has challenged some of the rational account’s assumption and predictions.

Keywords

  • Addiction, rational account of
  • Becker, G.
  • Drugs
  • Excise tax
  • Forward price elasticity
  • Rational behaviour
  • Sin taxes
  • Time consistency

JEL Classifications

  • D1

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Acknowledgments

We thank Caroline Acker, Ted O’Donoghue and Antonio Rangel for helpful suggestions.

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© 2018 Macmillan Publishers Ltd.

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Loewenstein, G., Rick, S. (2018). Addiction. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2361

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