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A theory of mood-influenced consumption and investment in health

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  • Caputo, Michael R.
  • Levy, Amnon

Abstract

A mood-utility link is incorporated into a theory of rational consumption and investment in personal health, whereby one’s mood worsens as instantaneous utility falls below a threshold but improves as instantaneous utility rises above it. The analysis is conducted within an intertemporal framework, where instantaneous utility is gained and lost and good and bad moods are experienced along a health-dependent random lifespan. The qualitative properties of the resulting optimal control model are investigated by making use of the Frischian form of the feedback demand functions. One of several surprising results derived from this framework is that the marginal value of health can be negative or positive, whereas the marginal values of wealth and mood are unambiguously positive.

Suggested Citation

  • Caputo, Michael R. & Levy, Amnon, 2012. "A theory of mood-influenced consumption and investment in health," Mathematical Social Sciences, Elsevier, vol. 63(3), pages 218-227.
    • Handle: RePEc:eee:matsoc:v:63:y:2012:i:3:p:218-227
    DOI: 10.1016/j.mathsocsci.2012.01.003
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    References listed on IDEAS

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    1. Caputo,Michael R., 2005. "Foundations of Dynamic Economic Analysis," Cambridge Books, Cambridge University Press, number 9780521842723.
    2. Levy, Amnon, 2002. "Rational eating: can it lead to overweightness or underweightness?," Journal of Health Economics, Elsevier, vol. 21(5), pages 887-899, September.
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    4. Heckman, James J, 1974. "Life Cycle Consumption and Labor Supply: An Explanation of the Relationship Between Income and Consumption Over the Life Cycle," American Economic Review, American Economic Association, vol. 64(1), pages 188-194, March.
    5. Levy, Amnon, 2002. "A lifetime portfolio of risky and risk-free sexual behaviour and the prevalence of AIDS," Journal of Health Economics, Elsevier, vol. 21(6), pages 993-1007, November.
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    7. Menahem E. Yaari, 1965. "Uncertain Lifetime, Life Insurance, and the Theory of the Consumer," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(2), pages 137-150.
    8. Amnon Levy, 2000. "Would a Rational Lucy Take Off without Assessing the Probability of a Crash Landing?," Eastern Economic Journal, Eastern Economic Association, vol. 26(4), pages 431-437, Fall.
    9. Ried, Walter, 1998. "Comparative dynamic analysis of the full Grossman model," Journal of Health Economics, Elsevier, vol. 17(4), pages 383-425, August.
    10. Chaudhuri, Anita, 1996. "Comparative Statics for Dynamic Models: Empirical Implications of the Frisch Decomposition," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 103-114, February.
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    Cited by:

    1. Narimasa Kumagai & Seiritsu Ogura, 2014. "Persistence of physical activity in middle age: a nonlinear dynamic panel approach," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(7), pages 717-735, September.

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