Smoking and Health Investments: Impacts of Health Adaptation and Damage Reversibility
Jared Carbone (),
Snorre Kverndokk () and
No 2003:12, HERO Online Working Paper Series from University of Oslo, Health Economics Research Programme
In the present paper we examine how different sets of beliefs about the health effects of smoking would influence a rational smoker. By embedding the rational addiction theory in a Grossman model of health investment modified to take account of psychological adaptation effects, we present a model of a rational addict that allows us to explicitly specify beliefs about a direct and indirect effect on both death risk and utility. This allows us to study how a rational addict would smoke with different beliefs of cancer risks, and with or without the well-documented ability to adapt to health changes. Numerical simulation results illustrate a number of different incentives that influence the smoking paths and health investments under the various beliefs, and suggests that beliefs have different impacts at different ages, providing a richer set of dynamics than might initially be expected.
Keywords: Rational addiction; Demand for health; Adaptation; Risk; Life extension (search for similar items in EconPapers)
JEL-codes: C61 D91 I12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp and nep-hea
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:oslohe:2003_012
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