Life-Expectancy Augmented Rational Addition: A Note

Amnon Levy ()

Economics Working Papers from School of Economics, University of Wollongong, NSW, Australia

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.

Keywords: RATIONAL; EXPECTATIONS (search for similar items in EconPapers)
JEL-codes: D91 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hea and nep-mic
Date: 1998
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