Rational addiction and cultural goods: the case of the Italian theatregoer

This paper tests whether demand for theatre in Italy is consistent withthe model of rational addiction presented in Becker and Murphy (J Polit Econ96(4):675–700, 1988). Data from a novel 34-year panel on regional annual theatreattendance are used to estimate market demand. Four models are applied to investigatethe demand function, and all of these also include per capita income andother control variables as regressors. The first two models are estimated to checkwhether theatregoers are myopically addicted to theatre. The results suggest that thetheatre is an addictive good because past consumption (and prices) significantlyraises the marginal utility of current consumption. The third model tests the rationaladdiction hypothesis, which assumes that future attendance also influences currentattendance, whilst past and future prices influence current attendance only indirectlythrough their impact on past and future attendances. However, our most highlyspecified model, introducing past and future prices, demonstrates that Italian theatregoersare not myopic but fully rational as outlined in Becker and Murphy(1988). The results demonstrate that the rational addiction hypothesis is applicablenot only to ‘‘harmful’’ addictions such as alcohol, cigarettes and drug consumption,but also to ‘‘beneficial’’ addictions, such as theatre attendance. This result hasimportant policy implications because theatre is one of the most subsidised performingarts in Italy; if theatregoers are fully rational, policy makers can influencetheatre attendance using alternative policy instruments (price and income), therebyreducing government expenditure on theatre subsidies.