Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
10480090 | Mathematical Social Sciences | 2005 | 21 Pages |
Abstract
Defining habitual behavior as a positive relation between past and current consumption and addiction as a strong habit, Becker and Murphy (Journal of Political Economy, 1988) studied a model for rational addiction. They identified multiple steady states as another key feature of addiction. In the present paper it is shown how the interplay of addiction with a budget constraint may generate multiple long-run steady states. In the most interesting case, there exist two boundary saddle-point equilibria, as well as an unstable steady state in-between. The basins of attraction of the upper and the lower equilibria are separated by a threshold. Convergence to the lower long-run steady state may be interpreted as 'cold turkey', i.e., an immediate exit from consumption.
Related Topics
Physical Sciences and Engineering
Mathematics
Applied Mathematics
Authors
C. Gavrila, G. Feichtinger, G. Tragler, R.F. Hartl, P.M. Kort,