On Habits and Addictions

In an extension of the Becker-Murphy model of habitual behavior, it is assumed that a more excessive consumption history of a habitual good may trigger a stronger impatience. This endogenization of time preferences allows an integrative analysis of addictive behavior (history-dependent time preferences) and habitual behavior (limit case of constant time preferences), which reproduces and refines results from other economic models. It also yields various new predictions, which rationalize results from recent experiments on habitual consumption or correspond to previously neglected findings from addiction research.