Getting used to it: the adaptive global utility model

Title: Getting used to it: the adaptive global utility model
Authors: Bradford, W. David and Dolan, Paul
Publisher: Journal of health economics, 29 (6). pp. 811-820
ISSN: 0167-6296
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Abstract: This paper expands the standard model of utility maximization to endogenize the ubiquitous phenomenon of adaptation. We assume that total utility is an aggregate function of the utility associated with different domains of life, with relative weights that are optimized according to the effort that the individual expends on producing utility in each domain. Comparative statics from the general maximization problem demonstrate that the traditional Slutsky equation should incorporate an additional response term to account for adaptation processes. Our adaptive global utility maximization model can be used to explain responses to changes in health.