Smoking and Health Investments: Impacts of Health Adaptation and Damage Reversibility
AbstractIn the present paper we examine how different sets of beliefs about the health effects of smoking would influence a rational smoker. By embedding the rational addiction theory in a Grossman model of health investment modified to take account of psychological adaptation effects, we present a model of a rational addict that allows us to explicitly specify beliefs about a direct and indirect effect on both death risk and utility. This allows us to study how a rational addict would smoke with different beliefs of cancer risks, and with or without the well-documented ability to adapt to health changes. Numerical simulation results illustrate a number of different incentives that influence the smoking paths and health investments under the various beliefs, and suggests that beliefs have different impacts at different ages, providing a richer set of dynamics than might initially be expected.
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Bibliographic InfoPaper provided by Oslo University, Health Economics Research Programme in its series HERO On line Working Paper Series with number 2003:12.
Length: 44 pages
Date of creation: 21 Jun 2009
Date of revision:
Contact details of provider:
Postal: HERO / Institute of Health Management and Health Economics P.O. Box 1089 Blindern, N-0317 Oslo, Norway
Phone: 2307 5309
Fax: 2307 5310
Web page: http://www.hero.uio.no/eng.html
More information through EDIRC
Rational addiction; Demand for health; Adaptation; Risk; Life extension;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- I12 - Health, Education, and Welfare - - Health - - - Health Production
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-03 (All new papers)
- NEP-CMP-2009-07-03 (Computational Economics)
- NEP-HEA-2009-07-03 (Health Economics)
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