Digital Temptation and Addiction: An Economic Perspective

Research Interest
In this talk, I present two recent works and future projects on economic investigations of digital temptation and addiction. In the first paper, we explore the digital vulnerabilities driven by excessive dependence on mobile social apps (e.g., SNS and social games) by drawing on the rational addiction framework. “Rational” addicts anticipate the future consequences of their current behaviors and accordingly exercise self-control to maximize utility from their intertemporal consumption choices. Conversely, “myopic” addicts tend toward immediate gratification, exhibit time-inconsistent preferences, and suffer from a lack of self-control, thereby putting themselves at great risk. We empirically validate rational addiction in the context of social app consumption by 13-month, individual-level panel data on the weekly app usage of thousands of smartphone users. In the second paper, we estimate a rational addiction model of consumers who face immediate rewards with delayed cost of addiction by fully recovering the structural parameters in the consumer utility. We propose a new estimation strategy to overcome the limitations by employing the rational expectations framework of Hansen-Singleton (1982). We apply the proposed approach to the analysis of time consumption of a mobile social application in which the primary value of consumption derives from the network effects created by the peers to interact with. We develop a unique identification strategy exploiting the nonstationary dynamics of total active users for identifying discount factor. We provide valuable implications that policymakers can use to effectively manage digital addiction problems.