Life Cycle Consumption of a Harmful and Addictive Good

David Goldbaum

Economic Inquiry, 2000, vol. 38, issue 3, 458-69

Abstract: This article demonstrates that the endogenous desire to quit smoking can result from a rational consumption path chosen at the time the consumer begins smoking. This result is obtained without relying on hidden costs or unknown preferences. A finite-lived agent chooses a path of consumption of a harmful and addictive good to maximize present discounted utility. The consumer chooses his consumption rate to account for the future health consequence of smoking and the withdrawal costs of quitting. A consumer may choose to smoke even if it means a lowered utility level for the majority of the time spent smoking. Copyright 2000 by Oxford University Press.

Date: 2000
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