A Theory of Rational Addiction

  title={A Theory of Rational Addiction},
  author={G. Becker and K. Murphy},
  journal={Journal of Political Economy},
  pages={675 - 700}
  • G. Becker, K. Murphy
  • Published 1988
  • Economics
  • Journal of Political Economy
  • We develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time. Strong addiction to a good requires a big effect of past consumption of the good on current consumption. Such powerful complementarities cause some steady states to be unstable. They are an important part of our analysis because even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid… CONTINUE READING
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