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The meaning of death: some numerical simulations of a model of healthy and unhealthy consumption

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  • Martin Forster

Abstract

This paper presents some numerical simulations of a model of healthy and unhealthy consumption to investigate the impact of various terminal conditions on an individual's life-span, pathways of consumption and health. A `benchmark' model, in which both the life-span and the individual's `death' stock of health are xed, is compared to (i) a version in which the `death' stock of health is freely chosen; (ii) a version in which life-span is freely chosen; (iii) a version in which both the `death' stock of health and life-span are freely chosen. Results show how the choice of terminal conditions has a striking impact on both optimal plans and comparative static/dynamic predictions and raise questions about how to model `death' in deterministic demand for health models. Results also illustrate the application of iterative processes to determine an optimal life-span in continuous time models, the role of the marginal value of health capital in determining optimal plans, and the importance of checking the second-order conditions for the optimal choice of life-span in such models.

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Bibliographic Info

Paper provided by Department of Economics, University of York in its series Discussion Papers with number 00/34.

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Handle: RePEc:yor:yorken:00/34

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Keywords: The demand for health; healthy and unhealthy consumption; terminal and transversality conditions; optimal life-span.;

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  1. Grossman, Michael, 1998. "On optimal length of life," Journal of Health Economics, Elsevier, vol. 17(4), pages 499-509, August.
  2. Ehrlich, Isaac & Chuma, Hiroyuki, 1990. "A Model of the Demand for Longevity and the Value of Life Extension," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 761-82, August.
  3. Eisenring, Christoph, 1999. "Comparative dynamics in a health investment model," Journal of Health Economics, Elsevier, vol. 18(5), pages 653-658, October.
  4. Ried, Walter, 1998. "Comparative dynamic analysis of the full Grossman model," Journal of Health Economics, Elsevier, vol. 17(4), pages 383-425, August.
  5. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
  6. Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521331586, October.
  7. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August.
  8. Forster, Bruce A, 1989. "Optimal Health Investment Strategies," Bulletin of Economic Research, Wiley Blackwell, vol. 41(1), pages 45-57, January.
  9. Caputo, Michael R. & Wilen, James E., 1995. "Optimality conditions and comparative statics for horizon and endpoint choices in optimal control theory," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 351-369.
  10. Michael Grossman, 1972. "The Demand for Health: A Theoretical and Empirical Investigation," NBER Books, National Bureau of Economic Research, Inc, number gros72-1.
  11. Dorfman, Robert, 1969. "An Economic Interpretation of Optimal Control Theory," American Economic Review, American Economic Association, vol. 59(5), pages 817-31, December.
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Cited by:
  1. Drichoutis, Andreas C. & Lazaridis, Panagiotis & Nayga, Rodolfo M., Jr., 2006. "Nutritional food label use: A theoretical and empirical perspective," 98th Seminar, June 29-July 2, 2006, Chania, Crete, Greece 10033, European Association of Agricultural Economists.
  2. Andreas Drichoutis & Panagiotis Lazaridis & Rodolfo Nayga & Maria Kapsokefalou & George Chryssochoidis, 2008. "A theoretical and empirical investigation of nutritional label use," The European Journal of Health Economics, Springer, vol. 9(3), pages 293-304, August.

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