A Theory of Natural Addiction

29 Pages Posted: 9 Apr 2007

See all articles by Trenton G. Smith

Trenton G. Smith

University of Otago

Attila Tasnadi

Corvinus University of Budapest

Multiple version iconThere are 2 versions of this paper

Abstract

Economic theories of rational addiction aim to describe consumer behavior in the presence of habit-forming goods. We provide a biological foundation for this body of work by formally specifying conditions under which it is optimal to form a habit. We demonstrate the empirical validity of our thesis with an in-depth review and synthesis of the biomedical literature concerning the action of opiates in the mammalian brain and their effects on behavior. Our results lend credence to many of the unconventional behavioral assumptions employed by theories of rational addiction, including adjacent complementarity and the importance of cues, attention, and self-control in determining the behavior of addicts. Our approach suggests, however, that addiction is harmful only when the addict fails to implement the optimal solution. We offer evidence for the special case of the opiates that harmful addiction is the manifestation of a mismatch between behavioral algorithms encoded in the human genome and the expanded menu of choices - generated for example, by advances in drug delivery technology - faced by consumers in the modern world.

Keywords: endogenous opioids, sugar addiction, behavioral ecology, neuroendocrinology, autism

JEL Classification: C73, D11, D83, D87, D91, I12

Suggested Citation

Smith, Trenton G. and Tasnadi, Attila, A Theory of Natural Addiction. Games and Economic Behavior, Forthcoming, Available at SSRN: https://ssrn.com/abstract=979192

Trenton G. Smith (Contact Author)

University of Otago ( email )

PO Box 56
Dunedin
New Zealand

HOME PAGE: http://www.business.otago.ac.nz/econ/staff/smith.html

Attila Tasnadi

Corvinus University of Budapest ( email )

Fovam ter 8
Budapest, H-1093
Hungary

HOME PAGE: http://www.uni-corvinus.hu/~tasnadi

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