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

Colorado School of Mines

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

Colorado School of Mines ( email )

1500 Illinois Street
Golden, CO 80401
United States

HOME PAGE: http://www.mines.edu/~jcarbone

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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