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A model of addiction and social interactions

Author: Julian Reif; National Bureau of Economic Research,
Publisher: Cambridge, Mass. : National Bureau of Economic Research, 2018.
Series: Working paper series (National Bureau of Economic Research), no. 24842.
Edition/Format:   eBook : Document : EnglishView all editions and formats
Summary:
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  Read more...
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Details

Material Type: Document, Internet resource
Document Type: Internet Resource, Computer File
All Authors / Contributors: Julian Reif; National Bureau of Economic Research,
OCLC Number: 1047999927
Notes: "July 2018"
Description: 1 online resource (36 pages) : illustrations.
Series Title: Working paper series (National Bureau of Economic Research), no. 24842.
Responsibility: Julian Reif.

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.

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