TY - JOUR AU - Grossman,Michael AU - Chaloupka,Frank J. AU - Brown,Charles C. TI - The Demand for Cocaine by Young Adults: A Rational Addiction Approach JF - National Bureau of Economic Research Working Paper Series VL - No. 5713 PY - 1999 Y2 - February 1999 UR - http://www.nber.org/papers/w5713 L1 - http://www.nber.org/papers/w5713.pdf N1 - Author contact info: Michael Grossman Ph.D. Program in Economics City University of New York Graduate Center 365 Fifth Avenue, 5th Floor New York, NY 10016-4309 Tel: 212/817-7959 Fax: 212/817-1597 E-Mail: mgrossman@gc.cuny.edu Frank J. Chaloupka, IV University of Illinois at Chicago Department of Economics (m/c 144) College of Liberal Arts and Sciences 601 S. Morgan Street, Room 713 Chicago, IL 60607-7121 Tel: 312/413-2287 Fax: 312/996-3344;630/801-8870 E-Mail: fjc@uic.edu Charles C. Brown Department of Economics University of Michigan Ann Arbor, MI 48109-1220 Tel: 734/763-3036 Fax: 734/647-1186 E-Mail: charlieb@umich.edu M2 - featured in NBER digest on 1997-03-01 AB - This paper applies the rational addiction model, which emphasizes the interdependency of past, current, and future consumption of an addictive good, to the demand for cocaine by young adults in the Monitoring the Future Panel. The price of cocaine is added to this survey from the System to Retrieve Information from Drug Evidence (STRIDE) maintained by the Drug Enforcement Administration of the U.S. Department of Justice. Results suggest that annual participation and frequency of use given participation are negatively related to the price of cocaine. In addition current participation is positively related to past and future participation, and current frequency of use given participation is positively related to past and future frequency of use. The long-run price elasticity of total consumption (participation multiplied by frequency given participation) of -1.18 is substantial. A permanent 10 percent reduction in price due, for example, to the legalization of cocaine would cause the number of cocaine users to grow by slightly more than 8 percent and would increase the frequency of use among users by a little more than 3 percent. Surely, both proponents and opponents of drug legalization should take account of this increase in consumption in debating their respective positions. ER -