Alcohol myopia and choice

Alejandro Tatsuo Moreno Okuno () and Emiko Masaki
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Alejandro Tatsuo Moreno Okuno: Departamento de Economía y Finanzas. Universidad de Guanajuato
Emiko Masaki: Asian Development Bank

EconoQuantum, Revista de Economia y Finanzas, 2013, vol. 10, issue 2, 35-54

Abstract: The aim of this paper is to develop a model that explains how the consump-tion of some addictive substances affects individuals’ choices and especially how it af-fects individuals’ risk taking. We do this by assuming that some addictives substances, specifically alcohol, increase individuals’ discount of the future. As individuals that consume alcohol show greater preference for the present and less for the future, they would find choices with rewards in the present and costs in the future more attrac-tive. Therefore, an individual that wouldn’t have accepted an option may do so after consuming alcohol and he/she may regret his/her decision after the alcohol in his/her blood is eliminated. We analyze the effect of two taxes in the welfare of individuals that face an attractive but harmful choice: a tax on the consumption of alcohol and a tax (or penalty) if the future costs of the choice are realized.

Keywords: Habit-formation; risk taking; alcohol consumption. (search for similar items in EconPapers)
JEL-codes: D11 D60 D81 D91 (search for similar items in EconPapers)
Date: 2013
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