Many previous studies in health and psychology have examined psychological variables associated with cigarette and alcohol use. They found that social-psychological variables are important factors in addictive consumption behavior. Studies of addiction in economics, however, have mainly focused on the inter-temporal dependence of consumption based on rational addiction models. In this study, we present a modified addiction model which incorporates social-psychological factors. This is done through a utility function which includes stress as its component and an income function with depends on health. Hence this study considers not only the inter-temporal dependence but also the psychological phenomena as characteristics of addictive behavior.
We apply this model to cigarette consumption in Korea using the data from Korean Household Panel Study(KHPS). The results show that the inter-temporal dependence in cigarette consumption is highly significant, and the impact of social-psychological factors are negative but weak.
