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Health and Wealth: How do They Affect Individual Preferences?

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  • Béatrice Rey

    ()

  • Jean-Charles Rochet

    ()

Abstract

There is no consensus among health economists about the specification of individual preferences that best fits observed behaviors. One crucial point of disagreement concerns the sign of the interaction between health and wealth in individual utility functions. We propose here a simple, static, model where individuals have only one decision to make concerning their future health (say to get a flu shot). We derive very simple testable implications that allow to discriminate between three specifications that are commonly used in theoretical models: additive separability between health and consumption, multiplicative separability, and existence of a monetary equivalent of health. We also derive several implications on the pattern of the demand for health insurance.

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Bibliographic Info

Article provided by Springer in its journal The GENEVA PAPERS on Risk and Insurance Theory.

Volume (Year): 29 (2004)
Issue (Month): 1 (06)
Pages: 43-54

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Handle: RePEc:kap:geneva:v:29:y:2004:i:1:p:43-54

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Web page: http://www.springerlink.com/link.asp?id=102897

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Cited by:
  1. Bennardo, Alberto & Piccolo, Salvatore, 2005. "Competitive Markets with Endogenous Health Risks," CEPR Discussion Papers 5385, C.E.P.R. Discussion Papers.
  2. Louis Eeckhoudt & Béatrice Rey & Harris Schlesinger, 2007. "A Good Sign for Multivariate Risk Taking," Management Science, INFORMS, vol. 53(1), pages 117-124, January.
  3. Mario Menegatti, 2014. "Optimal choice on prevention and cure: a new economic analysis," The European Journal of Health Economics, Springer, vol. 15(4), pages 363-372, May.

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