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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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  1. Matthew Rabin & Ted O'Donoghue, 1999. "Doing It Now or Later," American Economic Review, American Economic Association, vol. 89(1), pages 103-124, March.
  2. Cawley, John & Markowitz, Sara & Tauras, John, 2004. "Lighting up and slimming down: the effects of body weight and cigarette prices on adolescent smoking initiation," Journal of Health Economics, Elsevier, vol. 23(2), pages 293-311, March.
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  7. Smith, Trenton G, 2002. "The McDonald's Equilibrium: Advertising, Empty Calories, and the Endogenous Determination of Dietary Preferences," University of California at Santa Barbara, Economics Working Paper Series qt0hx9x4jr, Department of Economics, UC Santa Barbara.
  8. Levy, A., 2000. "A Lifetime Portfolio of Risky and Risk-Free Sexual Behaviour and the Prevalence of AIDS," Economics Working Papers wp01-04, School of Economics, University of Wollongong, NSW, Australia.
  9. Christopher J. Ruhm, 2000. "Are Recessions Good for Your Health?," The Quarterly Journal of Economics, Oxford University Press, vol. 115(2), pages 617-650.
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  12. Hugo Mialon & Sue Mialon, 2005. "Sinful indulgences, soft substitutes, and self-control," Applied Economics Letters, Taylor & Francis Journals, vol. 12(12), pages 719-722.
  13. Deolalikar, Anil B, 1988. "Nutrition and Labor Productivity in Agriculture: Estimates for Rural South India," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 406-13, August.
  14. Karen E. Dynan, 2000. "Habit Formation in Consumer Preferences: Evidence from Panel Data," American Economic Review, American Economic Association, vol. 90(3), pages 391-406, June.
  15. Bleichrodt, Han & Quiggin, John, 1999. "Life-cycle preferences over consumption and health: when is cost-effectiveness analysis equivalent to cost-benefit analysis?," Journal of Health Economics, Elsevier, vol. 18(6), pages 681-708, December.
  16. Chou, Shin-Yi & Grossman, Michael & Saffer, Henry, 2004. "An economic analysis of adult obesity: results from the Behavioral Risk Factor Surveillance System," Journal of Health Economics, Elsevier, vol. 23(3), pages 565-587, May.
  17. Arulampalam, W. & Robin A. Naylor & Jeremy P. Smith, 2002. "University of Warwick," Royal Economic Society Annual Conference 2002 9, Royal Economic Society.
  18. Bleichrodt, Han, 1995. "QALYs and HYEs: Under what conditions are they equivalent?," Journal of Health Economics, Elsevier, vol. 14(1), pages 17-37, May.
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