Carbone, Jared (Economics Department) Kverndokk, Snorre () (Ragnar Frisch Centre for Economic Research) Røgeberg, Ole-Jørgen (Ragnar Frisch Centre for Economic Research)
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In 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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Paper 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: Handle: RePEc:hhs:oslohe:2003_012
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