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A theoretical analysis of rational diet of healthy and junk foods

Junk-food consumption, health and productivity are analysed within an expectedlifetime- utility-maximising framework in which longevity and productivity rise with health, and health deteriorates with the consumption of junk food. As long as the junk food’s relative taste-price differential is positive, rational diets deviate from the physiologically optimal ones and generate lower than maximal levels of health and productivity. Taxing junk food can eliminate this discrepancy, but the outcome is not Pareto-superior. The value of health and the steady-state levels of rational junk-food consumption, health and productivity depend on the consumer’s tastes, prices, endurance, appetite and time preferences.

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File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/web/uow020252.pdf
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Paper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp07-01.

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Length: 24 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:uow:depec1:wp07-01
Contact details of provider: 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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