Publication Date

January 1998

Publication Details

Levy, A, Would a Rational Lucy Take-Off Without Accessing the Probability of a Crash Landing?, Working Paper 98-1, Department of Economics, University of Wollongong, 1998.


A random life expectancy and a positive relationship between the probability of dying and the degree of addiction are incorporated into a model of rational addiction. 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 appreciation of the consumption capital stock is positive as long as the improved consumption enjoyment dominates the diminishing survival prospects. The rate of change of the shadow price of addiction is lower than that obtained when the effect of addiction on the probability of dying is ignored. (JEL classification: D91)