taking by returning to old diet and exercise habits completely offsets the health benefits of
medicine.
Even with the sign restrictions imposed here, it is possible that--+--> 0. That is, bad health
∂η ∂M
news and the opportunity to mitigate adverse health effects with medication could have a
decidedly negative effect on diet and lifestyle choices, leaving individuals with greater health
risks than if they had not been diagnosed with a diet-related illness. The shape and position of
the perceived health production function allow for this possibility. Health can be compromised
the second inequality, the first is straightforward. The inequality suggests that medication is
perceived to offer health benefits at the margin that are greater than the health decrement lost to
bad health news. That is, if medication offers to more-than-counteract the bad news, it opens the
opportunity to maximize utility by compromising on diet and exercise even more than before the
news.
if HM
> ∣H∙∣ and ∣hmm I >
HMη
P
PM H
PB
Bη
While there is little intuition that can be offered for
Empirical Approach
The theoretical model implies that dietary choices and level of physical activity will be a
function of prices, health conditions and whether or not an individual takes medication to control
these conditions. Analysis of the equilibrium conditions yields three hypotheses that can be
tested empirically:
12
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