American Economic Review, 94(5), 2004, 1558-1590
We propose a model of addiction based on three premises: (i) use among addicts is frequently a mistake; (ii) experience sensitizes an individual to environmental cues that trigger mistaken usage; (iii) addicts understand and manage their susceptibilities. We argue that these premises find support in evidence from psychology, neuroscience, and clinical practice. The model is tractable and generates a plausible mapping between behavior and the characteristics of the user, substance, and environment. It accounts for a number of important patterns associated with addiction, gives rise to a clear welfare standard, and has novel implications for policy.