Smoking and Health Investments: Impacts of Health Adaptation and Damage Reversibility

University of Oslo Health Economics Research Program Working Paper No. 2003:12

44 Pages Posted: 11 Aug 2003

See all articles by Jared C. Carbone

Jared C. Carbone

University of Calgary - Department of Economics

Snorre Kverndokk

Ragnar Frisch Centre for Economic Research

Ole Jorgen Røgeberg

Ragnar Frisch Centre for Economic Research

Date Written: 2003

Abstract

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

JEL Classification: C61, D91, I12

Suggested Citation

Carbone, Jared C. and Kverndokk, Snorre and Røgeberg, Ole Jorgen, Smoking and Health Investments: Impacts of Health Adaptation and Damage Reversibility (2003). University of Oslo Health Economics Research Program Working Paper No. 2003:12. Available at SSRN: https://ssrn.com/abstract=415960 or http://dx.doi.org/10.2139/ssrn.415960

Jared C. Carbone

University of Calgary - Department of Economics ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada

Snorre Kverndokk (Contact Author)

Ragnar Frisch Centre for Economic Research ( email )

Gaustadalleen 21
N-0349 Oslo
Norway
+47 22958811 (Phone)
+47 22958825 (Fax)

HOME PAGE: http://www.frisch.uio.no/cv/snorrek_eng.html

Ole Jorgen Røgeberg

Ragnar Frisch Centre for Economic Research ( email )

Gaustadalleen 21
N-0349 Oslo
Norway
+ 47 22 95 88 27 (Phone)
+ 47 22 95 88 25 (Fax)

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