Pricing and R&D When Consumption Affects Longevity

Pierre Geoffard and Tomas Philipson

RAND Journal of Economics, 2002, vol. 33, issue 1, 85-95

Abstract: We analyze goods for which the amount of consumption determines the duration of consumption, focusing on health-related consumption that affects longevity. The characteristics of the demand for such goods lead to unique predictions about private pricing and investment in R&D as well as the fiscal effects of public subsidies and taxes. In particular, we argue that there is an R&D feedback for such goods when the market size expands through longevity-induced population growth. We also argue that as developed countries devote large shares of public spending to old-age programs that may themselves affect longevity, e.g., Medicare and Social Security, the nonstandard effects that these programs introduce may become increasingly important.

Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:rje:randje:v:33:y:2002:i:spring:p:85-95

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