The application outlines a method that tests the hypothesis concerning how best to model addictive consumption of cigarettes: through a rational model that includes knowledge of future events or through a myopic model that can, at best, incorporate past information into current consumption decisions. Upon determining the appropriate model, the project will analyze how prices and other regulatory variables affect consumption of the addictive good. Addictive stock, a capital stock approach to propensity to consume, will be proxied using a variety of stress measures, namely answers to questions on health, employment, death and interpersonal relationships attempting to eliminate the need for three observations on consumption that are typically necessary to test a rational model. Socioeconomic concerns will be addressed due to the high level of minority and women participants in the study. This should allow a robust analysis as to whether cigarettes behave as an inferior good and the effect this status has on consumption by the mentioned groups.
