Name
Abstract | ||
|---|---|---|
Becker and Murphy (J Polit Econ 96(4):675–700, ) have established the existence of unstable steady states leading to threshold behavior for optimal consumption rates in intertemporal rational addiction models. In the present paper a simple linear-quadratic optimal control model is used to illustrate how their approach fits into the framework of multiple equilibria and indifference-threshold points. By changing the degree of addiction and the level of harmfulness we obtain a variety of behavioral patterns. In particular we show that when the good is harmful as well as very addictive, an indifference-threshold point, also known in the literature as a Skiba point, separates patterns converging to either zero or maximal consumption, where the latter occurs in the case of a high level of past consumption. This implicitly shows that an individual needs to be aware in time of these characteristics of the good. Otherwise, he/she may start consuming so much that in the end he/she is totally addicted. |
Year | DOI | Venue |
|---|---|---|
2013 | 10.1007/s10100-012-0260-9 | CEJOR |
Keywords | Field | DocType |
Optimal control,Indifference points,History-dependence,Rational addiction | Behavioral pattern,Economics,Mathematical economics,Optimal control,Addiction,Rational addiction | Journal |
Volume | Issue | ISSN |
21 | 3 | 1435-246X |
Citations | PageRank | References |
1 | 0.50 | 2 |
Authors | ||
6 | ||
Name | Order | Citations | PageRank |
|---|---|---|---|
| Jonathan P. Caulkins | 1 | 140 | 23.90 |
| Gustav Feichtinger | 2 | 143 | 38.93 |
| Richard F. Hartl | 3 | 1863 | 137.30 |
| Peter M. Kort | 4 | 205 | 44.47 |
| Andreas J. Novak | 5 | 7 | 2.53 |
| Andrea Seidl | 6 | 21 | 6.18 |