|
Title
|
|
|
|
Multiple equilibria and indifference-threshold points in a rational addiction model
|
|
|
Author
|
|
|
|
|
|
|
Abstract
|
|
|
|
| Becker and Murphy (J Polit Econ 96(4):675-700, 1988) have established the existence of unstable steady states leading to threshold behavior for optimal consumption rates in intertemporal rational addiction models. In the present paper a simple linear-quadratic optimal control model is used to illustrate how their approach fits into the framework of multiple equilibria and indifference-threshold points. By changing the degree of addiction and the level of harmfulness we obtain a variety of behavioral patterns. In particular we show that when the good is harmful as well as very addictive, an indifference-threshold point, also known in the literature as a Skiba point, separates patterns converging to either zero or maximal consumption, where the latter occurs in the case of a high level of past consumption. This implicitly shows that an individual needs to be aware in time of these characteristics of the good. Otherwise, he/she may start consuming so much that in the end he/she is totally addicted. |
|
|
|
Language
|
|
|
|
English
|
|
|
Source (journal)
|
|
|
|
Central European journal of operations research. - New York
|
|
|
Publication
|
|
|
|
New York
:
2013
|
|
|
ISSN
|
|
|
|
1435-246X
|
|
|
DOI
|
|
|
|
10.1007/S10100-012-0260-9
|
|
|
Volume/pages
|
|
|
|
21
:3
(2013)
, p. 507-522
|
|
|
ISI
|
|
|
|
000322669300001
|
|
|
Full text (Publisher's DOI)
|
|
|
|
|
|
|
Full text (publisher's version - intranet only)
|
|
|
|
|
|