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A Model of Addiction and Social Interactions

Julian Reif

No 24842, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Many consumer behaviors are both addictive and social. Understanding how these two phenomena interact informs basic models of human behavior, and matters for policymakers when the behavior is regulated. I develop a new model of demand that incorporates both addiction and social interactions and show that, under certain conditions, social interactions reinforce the effects of addiction. I also show how the dynamics introduced by addiction can solve the pernicious problem of identifying the causal effects of social interactions. I then use the model to illustrate a new and important identification problem for studies of social interactions: existing estimates cannot be used to draw welfare conclusions or even to deduce whether social interactions increase aggregate demand. Finally, I develop a method that allows researchers to distinguish between two common forms of social interactions and draw welfare conclusions.

JEL-codes: D11 D12 H0 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hea and nep-soc
Date: 2018-07
Note: HC HE LE PE
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Published as Julian Reif, 2019. "A MODEL OF ADDICTION AND SOCIAL INTERACTIONS," Economic Inquiry, vol 57(2), pages 759-773.

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