The Economic Modeling of the Gateway Effect

7 Pages Posted: 6 Aug 1997

See all articles by Rosalie Liccardo Pacula

Rosalie Liccardo Pacula

Health Economics, Finance and Organization, RAND Corporation; National Bureau of Economic Research (NBER)


Although a significant number of empirical studies provide evidence of sequencing in drug use, economic theory remains focused on addiction to a single substance. This paper presents a general model of substance use that allows for the possibility of multi-commodity habit formation and can be used to analyze the intertemporal relationship between the consumption of legal and illicit drugs, or the gateway effect. A simple two drug model is analyzed and conditions for the existence of multi-commodity habit formation are examined. It is found in the case of multi-commodity habit formation that the marginal utility of initiating a new drug is higher when there is prior consumption of the other drug. Further, it is found that the individual will initiate drug consumption with that drug that has the lowest marginal cost. The particular sequencing of drug use that is observed in empirical data is explained by differences in the marginal cost of consuming legal and illegal drugs.

JEL Classification: E1

Suggested Citation

Pacula, Rosalie Liccardo, The Economic Modeling of the Gateway Effect. Available at SSRN: or

Rosalie Liccardo Pacula (Contact Author)

Health Economics, Finance and Organization, RAND Corporation ( email )

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