Comparison of Addictions Using Habit Formation Utility Function: With a Focus on Smoking and Drinking

Abstract

We investigated the theoretical background of adolescent addictive behavior by employing a habit formation utility function where others’ consumption matters. By carrying out a comparative static analysis, we reinterpreted the relation between habit strength () and optimal consumption. Also we found how a habit-forming consumer reached addictive consumption under dynamic equilibrium. Our estimation of habit formation parameters () revealed tobacco consumption to be more addictive than alcohol consumption and general consumption. We believe that academic contribution of our work would be extending previous clinical and empirical studies on addiction in a theoretical way.