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Would a Rational Lucy Take Off without Assessing the Probability of a Crash Landing?

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  • Amnon Levy

    (University of Wollongong)

Abstract

A random life expectancy and a positive relationship between the probability of dying and the degree of addiction are incorporated into a rational addiction model. The Becker-Murphy equality between the addictive commodity's full price and marginal utility is modified by discounting the market price and marginal utility of the addictive commodity by the probability of survival. The individual's negative appreciation of the addictive stock is reinforced by the diminishing survival prospects. The rate of change of the consumption of the addictive commodity is lower than that obtained when the effect of addiction on the probability of dying is ignored.

Suggested Citation

  • 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.
    • Handle: RePEc:eej:eeconj:v:26:y:2000:i:4:p:431-437
    as

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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume26/V26N4P431_437.pdf
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    References listed on IDEAS

    as
    1. Grossman, Michael & Chaloupka, Frank J & Sirtalan, Ismail, 1998. "An Empirical Analysis of Alcohol Addiction: Results from the Monitoring the Future Panels," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 39-48, January.
    2. Chaloupka, Frank, 1991. "Rational Addictive Behavior and Cigarette Smoking," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 722-742, August.
    3. Olekalns, Nilss & Bardsley, Peter, 1996. "Rational Addiction to Caffeine: An Analysis of Coffee Consumption," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1100-1104, October.
    4. Becker, Gary S & Grossman, Michael & Murphy, Kevin M, 1994. "An Empirical Analysis of Cigarette Addiction," American Economic Review, American Economic Association, vol. 84(3), pages 396-418, June.
    5. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August.
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    Cited by:

    1. 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.

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    More about this item

    Keywords

    Addiction; Individual; Utility;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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