Economic Perspectives on Addiction: Hyperbolic Discounting and Internalities
Year: 2007
Type: preprint
Abstract: This paper provides an introduction, with critical interpretations, to the use of hyperbolic discounting as a model of behavior for the consumption of addictive goods. The exponential and hyperbolic discounting models are carefully reviewed, with particular emphasis on the implications for time consistency. We then present a simple explanation of the logic of market failure resulting from internalities and the economic inefficiency that can result when time inconsistent choices have inter-temporal impacts. We then briefly review, with commentary, key work, from the experimental and broader empirical literature, that can be used to assess and critique the hyperbolic discounting model.
Source: SSRN Electronic Journal
DOI: 10.2139/ssrn.1077613
Authors: Fritz L. Laux, Richard M. Peck
Institutions: Northeastern State University, University of Illinois Chicago
Language: English
Subfield: General Decision Sciences
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3123530148