ADDICTION AS EXTREME‐SEEKING

Abstract

This paper examines addictive and compulsive behavior within a new framework, in an effort to establish a stronger link to the psychological and sociological literature on the subject. Individuals who suffer an addiction are not the classic homo economicus of textbooks, but are instead extreme‐seekers. Concavities in indifference curves provide a simple characterization of extreme‐seeking. The consequences of consumption which is physiologically or psychologically addicting and which threatens the individual's health are modeled in terms of capital and threshold effects. The model is then used, tentatively, to assess policies aimed at controlling substance abuse.