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Substitution Effects in Intertemporal Problems

Author

Listed:
  • Davide Dragone
  • Paolo Vanin

Abstract

We consider a broad class of intertemporal economic problems and characterize the short-run and long-run responses of the demand for a good to a permanent increase in its market price. Depending on the interplay between self-productivity and time discounting, we show that dynamic substitution effects can generate price elasticities of opposite signs in the short run and in the long run.

Suggested Citation

  • Davide Dragone & Paolo Vanin, 2022. "Substitution Effects in Intertemporal Problems," American Economic Journal: Microeconomics, American Economic Association, vol. 14(3), pages 791-809, August.
    • Handle: RePEc:aea:aejmic:v:14:y:2022:i:3:p:791-809
    DOI: 10.1257/mic.20200121
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    Cited by:

    1. Carl‐Johan Dalgaard & Casper Worm Hansen & Holger Strulik, 2021. "Fetal origins—A life cycle model of health and aging from conception to death," Health Economics, John Wiley & Sons, Ltd., vol. 30(6), pages 1276-1290, June.
    2. Strulik, Holger, 2022. "A health economic theory of occupational choice, aging, and longevity," Journal of Health Economics, Elsevier, vol. 82(C).
    3. Holger Strulik & Volker Grossmann, 2024. "Beyond Covid: Pandemics and the Economics of Aging and Longevity," CESifo Working Paper Series 11104, CESifo.
    4. Ana Lucia Abeliansky & Holger Strulik, 2023. "Health and aging before and after retirement," Journal of Population Economics, Springer;European Society for Population Economics, vol. 36(4), pages 2825-2855, October.
    5. Kelly, Mark & Kuhn, Michael, 2022. "Congestion in a public health service: A macro approach," Journal of Macroeconomics, Elsevier, vol. 74(C).
    6. Cawley, John & Dragone, Davide, 2024. "Harm reduction for addictive consumption: When does it improve health and when does it backfire?," Journal of Health Economics, Elsevier, vol. 98(C).
    7. Strulik, Holger & Grossmann, Volker, 2025. "The unequal effect of pandemics on aging and longevity: A health economic analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 239(C).
    8. Davide Dragone & Gustav Feichtinger & Dieter Grass & Richard F. Hartl & Peter M. Kort & Andrea Seidl & Stefan Wrzaczek, 2025. "Obesity, Sedentary Behavior and Lifestyle: A Lifecycle Model of Eating and Physical Activity," Working Papers wp1200, Dipartimento Scienze Economiche, Universita' di Bologna.

    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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