A Model of Addiction and Social Interactions

37 Pages Posted: 1 Aug 2018 Last revised: 19 May 2023

See all articles by Julian Reif

Julian Reif

University of Illinois at Urbana-Champaign

Multiple version iconThere are 2 versions of this paper

Date Written: July 2018

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.

Suggested Citation

Reif, Julian, A Model of Addiction and Social Interactions (July 2018). NBER Working Paper No. w24842, Available at SSRN: https://ssrn.com/abstract=3218072

Julian Reif (Contact Author)

University of Illinois at Urbana-Champaign ( email )

601 E John St
Champaign, IL Champaign 61820
United States

HOME PAGE: http://www.julianreif.com

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
14
Abstract Views
251
PlumX Metrics