English, Article, Journal or magazine article edition: Some Fundamental Problems in Becker, Grossman and Murphy's Implementation of Rational Addiction Theory Knut R. Wangen

User activity

Share to:
 
Bookmark: http://trove.nla.gov.au/version/53947
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Some Fundamental Problems in Becker, Grossman and Murphy's Implementation of Rational Addiction Theory
Author
  • Knut R. Wangen
Physical Description
  • preprint
Notes
  • The econometric implementation of rational addiction theory has been highly influenced by Becker, Grossman and Murphy (BGM). They specify an Euler equation where current consumption is determined by current price and past and future consumption. This model is claimed to be able to discriminate between rational addictive, myopic addictive, and non-addictive behavior. However, as demonstrated in this paper, the coefficients of the Euler equation are not structural parameters. Provided that two implausible assumptions do not hold, the Euler equation coefficients for the rational addict are shown to be non-constant. But even when these assumptions are assumed to be valid, the coefficients of the Euler equation will vary under the alternative hypothesis of myopic addiction. Moreover, and in contrast to the common interpretation, BGM's non-addicted consumer is influenced by past consumption, implying that a rational and a myopic non-addict behave differently. These problems makes it unclear how analyses based on the BGM approach can support, or reject, rational addiction theory.
  • Rational addiction; Euler equation
  • RePEc:ssb:dispap:375
Language
  • English
Contributed by
OAIster

Get this edition

Other links

  • Set up My libraries

    How do I set up "My libraries"?

    In order to set up a list of libraries that you have access to, you must first login or sign up. Then set up a personal list of libraries from your profile page by clicking on your user name at the top right of any screen.

  • All (1)
  • Unknown (1)
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.

User activity


e.g. test cricket, Perth (WA), "Parkes, Henry"

Separate different tags with a comma. To include a comma in your tag, surround the tag with double quotes.

Be the first to add a tag for this edition

Be the first to add this to a list

Comments and reviews

What are comments? Add a comment

No user comments or reviews for this version

Add a comment