At least for some consumers, the demand for alcoholic beverages may differ from the demands for most other consumer products because of the addictive nature of alcohol. Prior to the work by Becker and Murphy (1988), economic models of addiction assumed myopic behavior in which consumers ignore the future consequences of their current actions. Becker and Murphy (1988) developed a theoretical model that extends the utility-maximizing approach of economics to addictive substances. The consumption of these substances is influenced not only by their utility and the satisfaction they provide but also by acquired tolerance, reinforcement, and withdrawal. The main element of this and other models of addiction is the assumption that an increase in the past consumption of an addictive substance raises the current consumption of that substance. Unlike previous models of addiction, the Becker-Murphy model treats addicts as “farsighted” in the sense that they consider, at least to some extent, the future consequences of their consumption decisions. This assumption implies that a person’s current consumption decisions will respond to changes in the expected future costs of consumption, such as
