Genetic testing with primary prevention and moral hazard
AbstractWe develop a model where a genetic test reveals whether an individual has a low or high probability of developing a disease. A costly prevention effort allows high-risk agents to decrease this probability. Agents are not obliged to take the test, but must disclose its results to insurers, and taking the test is associated to a discrimination risk. We study the individual decisions to take the test and to undertake the prevention effort as a function of the effort cost and of its efficiency. If effort is observable by insurers, agents undertake the test only if the effort cost is neither too large nor too low. If the effort cost is not observable by insurers, moral hazard increases the value of the test if the effort cost is low. We offer several policy recommendations, from the optimal breadth of the tests to policies to do away with the discrimination risk.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8977.
Date of creation: May 2012
Date of revision:
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Other versions of this item:
- David Bardey & Philippe De Donder, 2011. "Genetic testing with primary prevention and moral hazard," DOCUMENTOS DE TRABAJO 009083, UNIVERSIDAD DEL ROSARIO.
- Bardey, David & De Donder, Philippe, 2012. "Genetic testing with primary prevention and moral hazard," TSE Working Papers 12-320, Toulouse School of Economics (TSE).
- Bardey, David & De Donder, Philippe, 2012. "Genetic testing with primary prevention and moral hazard," IDEI Working Papers 729, Institut d'Économie Industrielle (IDEI), Toulouse.
- David Bardey & Philippe De Donder, 2012. "Genetic testing with primary prevention and moral hazard," DOCUMENTOS CEDE 009798, UNIVERSIDAD DE LOS ANDES-CEDE.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-29 (All new papers)
- NEP-CTA-2012-05-29 (Contract Theory & Applications)
- NEP-HEA-2012-05-29 (Health Economics)
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