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Genetic Testing and Repulsion from Chance

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  • Michael Hoel
  • Tor Iversen
  • Tore Nilssen
  • Jon Vislie

Abstract

A central theme in the international debate on genetic testing concerns the extent to which insurance companies should be allowed to use genetic information in their design of insurance contracts. We analyze this issue within a model with the following important feature: A person’s well-being depends on the perceived probability of becoming ill in the future in a way that varies among individuals. We show that both tested high-risks and untested individuals are equally well off whether or not test results can be used by insurers. Individuals who test for being low-risks, on the other hand, are made worse off by not being able to verify this to insurers. This implies that verifiability dominates nonverifiability in an ex-ante sense.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1181.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1181

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  1. Grant, S & Kajii, A & Polak, B, 1997. "Intrinsic Preference for Information," Papers, Australian National University - Department of Economics 323, Australian National University - Department of Economics.
  2. David M Kreps & Evan L Porteus, 1978. "Temporal Resolution of Uncertainty and Dynamic Choice Theory," Levine's Working Paper Archive 625018000000000009, David K. Levine.
  3. Michael Hoel & Tor Iversen, 2001. "Genetic Testing When There is a Mix of Compulsory and Voluntary Health Insurance," CESifo Working Paper Series 495, CESifo Group Munich.
  4. Doherty, Neil A. & Thistle, Paul D., 1996. "Adverse selection with endogenous information in insurance markets," Journal of Public Economics, Elsevier, vol. 63(1), pages 83-102, December.
  5. Chew, Soo Hong & Ho, Joanna L, 1994. "Hope: An Empirical Study of Attitude toward the Timing of Uncertainty Resolution," Journal of Risk and Uncertainty, Springer, vol. 8(3), pages 267-88, May.
  6. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 90(4), pages 630-49, November.
  7. Strohmenger, R. & Wambach, A., 2000. "Adverse selection and categorical discrimination in the health insurance markets: the effects of genetic tests," Journal of Health Economics, Elsevier, vol. 19(2), pages 197-218, March.
  8. Holmstrom, Bengt & Myerson, Roger B, 1983. "Efficient and Durable Decision Rules with Incomplete Information," Econometrica, Econometric Society, Econometric Society, vol. 51(6), pages 1799-819, November.
  9. Kuehn, Astrid & Wambach, Achim, 2001. "Breakdown of Will and the Value of Information," CEPR Discussion Papers 3111, C.E.P.R. Discussion Papers.
  10. Hoy, Michael & Polborn, Mattias, 2000. "The value of genetic information in the life insurance market," Journal of Public Economics, Elsevier, vol. 78(3), pages 235-252, November.
  11. Marie-Cécile FAGART & Bidénam KAMBIA-CHOPIN, 2006. "Prevention in insurance markets," Annales d'Economie et de Statistique, ENSAE, issue 82, pages 55-70.
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