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 an anticipated increase in price or new information about the health consequences of consumption. Although this assumption may appear to be counterintuitive, it generates a prediction that can be tested using data on alcohol consumption by the same person in 3 or more years. For example, the model predicts that the benefits of consumption this year depend on expected consumption next year. Accordingly, a reduction in next year’s consumption due to an increase in next year’s price should cause this year’s consumption to fall, a prediction that can be readily tested.
