Pricing and R&D When Consumption Affects Longevity

Posted: 16 Jan 2002

See all articles by Pierre-Yves Geoffard

Pierre-Yves Geoffard

Ecole Normale Superieure (ENS) - Department and Laboratory of Applied and Theoretical Economics (DELTA); Centre for Economic Policy Research (CEPR)

Tomas Philipson

University of Chicago; National Bureau of Economic Research (NBER)

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.

Suggested Citation

Geoffard, Pierre-Yves and Philipson, Tomas J., Pricing and R&D When Consumption Affects Longevity. RAND Journal of Economics, Vol. 33, No. 1, Spring 2002. Available at SSRN: https://ssrn.com/abstract=294546

Pierre-Yves Geoffard

Ecole Normale Superieure (ENS) - Department and Laboratory of Applied and Theoretical Economics (DELTA) ( email )

48 boulevard Jourdan
75014 Paris
France
+33 1 4313 6319 (Phone)
+33 1 4313 6310 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Tomas J. Philipson (Contact Author)

University of Chicago ( email )

Graduate School of Business
1101 East 58th Street
Chicago, 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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