Microeconomic theories of consumer behavior indicate that consumers want to maximize their individual utility and producers want to maximize their profits. In the case of gambling, casinos are profit maximizing organizations. Casinos want to attract more gamblers and specially those who gamble more money in order to increase their own profits and for this purpose casinos host different types of techniques to convince more and more people to spend their money for gambling. On the other hand addictive gamblers and their families argue against casinos that they persuade the individuals to gamble their money and convince them to take higher risks.
But microeconomic assumption of rational behavior of firms does not let us accept this argument against casinos because casinos are profit maximizing organizations and they are just fulfilling their objective of profit maximization.
Second important question is whether the behavior of gamble addiction call into question the underlying assumption of microeconomics? The major relevant assumptions of microeconomics here include i). Consumers have rational behavior and they make the decisions that benefit them and not harm and ii). Consumers take decisions through cost-benefit analysis which maximizes their total utility. Here the question is while the gambling addiction is proven very harmful and even caused suicide then why the gamblers make such decision.
Economic decisions are made by accounting for explicit and opportunity costs associated with the purchase of a good or service. Individuals must weigh the cost of gambling with the benefits gained from its consumption, while considering alternative products that could be consumed in its place. The resulting intangible benefits may be both cognitive and emotional in nature.
Gambling represents a rational behavior if the benefits outweigh the costs; for example, the opportunity for a large prize at a small affordable cost. Gambling could also defend as risk taking behavior of individuals which is defined by Trimpop (1994) as “any consciously, or non-consciously controlled behavior with a perceived uncertainty about its outcome, and/or about its possible benefits, or costs for the physical, economic or psycho-social well-being of oneself or others.”
Thus though rational at one level, consumer behavior becomes irrational when defective cognitions and repeated poor decisions lead to sub-optimal outcomes – that is when costs exceed benefits. When one individual involves in gambling to regain the recent gambling loss and continues this behavior again and again even after getting losses every time and get addictive to gambling. Then this behavioral addiction will indicate an irrational behavior.
There are several other behavioral addictions that might be harmful in one or the other context that we observe in our daily lives. Most common among these is addiction to internet use which includes gaming addiction, cyber relationship, cybersex addiction and social networking sites.
We can view the drawbacks of such addictions around us. For example, gaming addiction causes the office employees to spend excessive amount of time playing these games which results in notable decrease in their productivity. Likewise, children who get addicted to online games cause trouble at school and other activities and also cause damage their sight and mental abilities.
Secondly, cyber or online relationship addicts are deeply involved in looking for online relationships, often forgetting and neglecting their real-life family and friends. Normally, online relationships are formed on different social networking sites but these can occur anywhere you can interact with people online. Sometimes, people who pursue online relationships do so with concealing their real identity and appearance. This modern phenomena is known as the term “catfish.”
After being involved in an online social life and relation, a person may be left with inadequate social skills and unrealistic anticipations regarding in-person interactions. Most of the time, such condition results in inability to make real-world connections, which causes them to make more dependent on their cyber relationships.
Similarly, a cybersex addiction is one of the more self-explanatory internet addictions that could be harmful to one’s ability to form real-world sexual, romantic, or intimate relationships.
Next and most common addiction of internet is social networking. To get involved in social networking to some extent is a rational behavior but to remain in touch with social network all the day and night becomes harmful for users. According to a news article by Annie Hayes children and young adults are particularly at high risk of excessive use of social networking sites. There are also external social pressures that play vital role in this overusing. As Annie says in her article ‘For the younger generations it is seen as a ‘norm’ to have at least one social media account, resulting in a sense of peer pressure to be involved so that you are not left out’.
Likewise, adults who depend on their phones for most of the time in a day are particularly at risk to social media addiction. In another news article, Dr Johl. Says “Excessive use of social media becomes a problem when it disrupts daily living. By this we mean productivity being impacted, relationships suffering, hours lost to scrolling through social media, occurring late into the night and affecting sleep. Among teens, suicide and self-harm rates have increased exponentially since 2009, which is directly correlating with the growth of social media.”
All these examples of behavioral addictions are similar to gambling addiction. One can say that at the beginning people use internet for the sake of information and act as rational individuals but later on the excitement to see more and more make them addictive to that and irrespective of its harm people indulge in such activities and expresses an irrational behavior.
Thus the standard microeconomic theories of consumer behavior which assumes that individual is always rational fails for addictive behavior of people.
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