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Life-Expectancy Augmented Rational Addition: A Note

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Abstract

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 living at least until the time under consideration. the rate of change of the shadow price of addiction is lower than that obtained with models ignoring the effectof addiction on the probability of dying.

Suggested Citation

  • Levy-Livermore, A., 1998. "Life-Expectancy Augmented Rational Addition: A Note," Economics Working Papers wp98-01, School of Economics, University of Wollongong, NSW, Australia.
    • Handle: RePEc:uow:depec1:wp98-01
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    File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow012245.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    RATIONAL EXPECTATIONS;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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