Present-Biased Preferences and Publicly Provided Health Care
AbstractIn this paper, we analyze the welfare effects of publicly provided health care in an economy where the consumers have "present-biased" preferences due to quasi-hyperbolic discounting. The analysis is based on a two-type model with asymmetric information between the government and the private sector, and each consumer lives for three periods. We present formal conditions under which public provision to the young and middle-aged generation, respectively, leads to higher welfare. Our results show that quasi-hyperbolic discounting provides a strong incentive for public provision to the young generation; especially if the consumers are naive (instead of sophisticated).
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Bibliographic InfoPaper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 813.
Length: 36 pages
Date of creation: 17 Sep 2010
Date of revision:
Contact details of provider:
Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
Phone: 090 - 786 61 42
Fax: 090 - 77 23 02
Web page: http://www.econ.umu.se/
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Public provision of private goods; hyperbolic discounting; intertemporal model; asymmetric information;
Find related papers by JEL classification:
- D03 - Microeconomics - - General - - - Behavioral Economics; Underlying Principles
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-25 (All new papers)
- NEP-CTA-2010-09-25 (Contract Theory & Applications)
- NEP-HEA-2010-09-25 (Health Economics)
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