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Life-Expectancy Augmented Rational Addition: A Note

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Abstract

The Becker-Murphy equality between the addictive commodity's full price and marginal utility is modified by discounting the market price and marginal utility of the addictive commodity by the probability of living at least until the time under consideration. the rate of change of the shadow price of addiction is lower than that obtained with models ignoring the effectof addiction on the probability of dying.

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File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow012245.pdf
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Bibliographic Info

Paper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp98-01.

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Length: 6 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:uow:depec1:wp98-01

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Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
Phone: +612 4221-3659
Fax: +612 4221-3725
Web page: http://business.uow.edu.au/econ/index.html
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Keywords: RATIONAL EXPECTATIONS;

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  1. Athanasios Orphanides & David Zervos, 1992. "Rational addiction with learning and regret," Finance and Economics Discussion Series 216, Board of Governors of the Federal Reserve System (U.S.).
  2. Gary S. Becker & Michael Grossman & Kevin M. Murphy, 1994. "An Empirical Analysis of Cigarette Addiction," NBER Working Papers 3322, National Bureau of Economic Research, Inc.
  3. Michael Grossman & Frank J. Chaloupka & Ismail Sirtalan, 1995. "An Empirical Analysis of Alcohol Addiction: Results from the Monitoring the Future Panels," NBER Working Papers 5200, National Bureau of Economic Research, Inc.
  4. Gary S. Becker & Kevin M. Murphy, 1986. "A Theory of Rational Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State 41, Chicago - Center for Study of Economy and State.
  5. repec:ltr:wpaper:1994.21 is not listed on IDEAS
  6. Iannaccone, Laurence R., 1986. "Addiction and satiation," Economics Letters, Elsevier, vol. 21(1), pages 95-99.
  7. Frank J. Chaloupka, 1991. "Rational Addictive Behavior and Cigarette Smoking," NBER Working Papers 3268, National Bureau of Economic Research, Inc.
  8. Nilss Olekalns & Peter Bardsley, 1994. "Rational Addiction to Caffeine: an Analysis of Coffee Consumption," Working Papers 1994.21, School of Economics, La Trobe University.
  9. Douglas, Stratford, 1998. "The Duration of the Smoking Habit," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 49-64, January.
  10. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
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