A SURVEY OF ECONOMIC-MODELS OF ADDICTIVE BEHAVIOR

In economic analyses of addictive behavior, the consumption of a certa in good is termed to be an addiction if an increase in past consumptio n of the good leads to an increase in current consumption From policy legal, and public health perspectives, addictive goods are of interest because the consumption of many of these goods harms the consumer and others. The U.S. government and those of many other countries have ch osen to regulate such addictive substances as cigarettes, alcohol, coc aine, and marijuana by means of policies that raise their prices. Cons equently, the responsiveness of these substances to price is an import ant parameter in determining the optimal level of taxation or the impa cts of legalization of cocaine or marijuana. The economics of addictio n is very relevant to these issues because recent theoretical advances predict that addictive goods should be more sensitive to price than p reviously believed. Current empirical studies confirm this prediction.