Behavioral Economics WARREN K. BICKEL,DARREN R. CHRISTENSEN Center for Addiction Research, Psychiatric Research Institute, University of Arkansas for Medical Sciences, Little Rock, AR, USA Definition Behavioral economics is the study of drug consumption conceived as decision-making behavior under an eco- nomic framework. It is the combination of two separate disciplines: economics – the study of rational decision- making – and psychology – the study of human behavior. These two disciplines have been combined to examine actual decision-making behavior under an economic framework. This concatenation of paradigms has identi- fied a number of relationships that have been found to influence the consumption of commodities. We will illus- trate how behavioral economics, including the study of demand and temporal discounting, describes these inter- dependencies using examples from drug research. The fundamental concept in behavioral economics is ▶ demand, the amount of a commodity consumed at a specific price (Pearce 1989). This relationship between price and consumption has a natural translation to behav- ioral psychology, where a commodity can be considered as a reinforcer , something that increases the likelihood of the response occurring again, and price, which can be consid- ered the response requirement to obtain that reinforcer (Lea 1978). The relationship between price and consump- tion is expressed as a demand curve and typically follows a negative slope – as price increases consumption falls – and is referred to as the ‘‘law of demand.’’ Demand curves are categorized by ▶ elasticity – the degree to which a change in price changes the demand for a commodity. Demand is thought to be unit-elastic when increases in price results in proportional decreases in consumption, elastic when the change in price produces greater-than-proportional changes in consumption, and inelastic when a change in price causes smaller-than- proportional changes in consumption. Thus, the slope of the demand curve represents the elasticity of the price- consumption relationship. Principles and Role in Psychopharmacology Price Elasticity and Demand Curves of Goods MacKillop and Murphy (2007) investigated the relation- ship between price and demand for ▶ alcohol in college drinkers. They asked subjects the number of drinks they would consume at different prices and found that increas- ing drink prices decreased the anticipated consumption of heavy drinking episodes for both men and women. More- over, they found that heavy drinking episodes appeared to be inelastic at low prices and elastic at higher prices, indicating a mixed elasticity demand curve. Changes in price can also affect the consumption of concurrently available commodities. For example, Nader and Woolverton (1991) trained rhesus monkeys to choose between food and intravenous injections of ▶ cocaine or procaine. When the amount of food available was increased for the same response requirement (i.e., the price of food was decreased) and the doses of both drugs were held constant (i.e., the price of drugs was unchanged), the frequency of drug consumption decreased suggesting posi- tive ▶ cross-price elasticity – a decrease in price for one commodity resulted in the decreased consumption of the alternative. These results illustrate another feature of behavioral economics, the characterization of the interaction between commodities of qualitatively different goods and services along one continuum. At one end of the continuum, ▶ substitutes exist where increases in the price of one good correlate with increases in the consumption of an alternative commodity. For example, when the increase in the price of cocaine/procaine results in a decrease in consumption of cocaine/procaine and an increase in the consumption of food, the goods, food and cocaine/ procaine, are considered substitutes. At the other end of the continuum, ▶ complements exist where increases in the price of one good correlate with decreases in the demand for that good and the alternative good. In the middle of the continuum, where changes in the price of one commodity have no effect on the demand of the alternative, goods are considered ▶ independents. Thus, the price of alternatively available commodities, whether they are substitutes, complements or independents influ- ences demand. In addition to demand and price, income, or the total purchasing power or the overall rate of reinforcement, also influences consumption. This occurs to the degree to which normal and inferior goods can be bought. For example, an increase in income can lead to purchasing a more preferred good, such as smokers who buy a pre- ferred brand of cigarette rather than the less valued alter- native with the same nicotine level (DeGrandpre et al. 1993). These items would be normal goods and inferior goods, respectively. Income can also affect the elasticity of demand, where increases in income can lead to in- creased consumption of normal goods and decreased Behavioral Economics B 205 B