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Health Insurance and Consumer Welfare: The Case of Monopolistic Drug Markets

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Author Info
Anlauf, Markus
Wigger, Berthold U. (Institut für Volkswirtschaft und Statistik (IVS))

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Abstract

Individual moral hazard engendered by health insurance and monopolistic production are both typical phenomena of drug markets. We develop a simple model containing these two elements and show that private agents tend to overinsure themselves against health respectively drug expenses if drugs can be produced at low marginal costs. If marginal costs are negligible, health insurance should be abandoned at all.

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Publisher Info
Paper provided by Institut für Volkswirtschaft und Statistik (IVS), University of Mannheim in its series IVS discussion paper series with number 565.

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Handle: RePEc:mea:ivswpa:565

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Postal: Institut für Volkswirtschaft und Statistik, L7, 3-5, Room 408, University of Mannheim, 68131 Mannheim
Phone: +49/621/181.1861
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Web page: http://www.vwl.uni-mannheim.de/institut

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Find related papers by JEL classification:
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health

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  1. Feldman, Roger & Dowd, Bryan, 1991. "A New Estimate of the Welfare Loss of Excess Health Insurance," American Economic Review, American Economic Association, vol. 81(1), pages 297-301, March.
  2. Pauly, Mark V, 1974. "Overinsurance and Public Provision of Insurance: The Roles of Moral Hazard and Adverse Selection," The Quarterly Journal of Economics, MIT Press, vol. 88(1), pages 44-62, February. [Downloadable!] (restricted)
  3. Feldstein, Martin S, 1970. "The Rising Price of Physicians' Services," The Review of Economics and Statistics, MIT Press, vol. 52(2), pages 121-33, May. [Downloadable!] (restricted)
  4. Zeckhauser, Richard, 1970. "Medical insurance: A case study of the tradeoff between risk spreading and appropriate incentives," Journal of Economic Theory, Elsevier, vol. 2(1), pages 10-26, March. [Downloadable!] (restricted)
  5. Feldstein, Martin S, 1973. "The Welfare Loss of Excess Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 251-80, Part I, M. [Downloadable!] (restricted)
  6. Spence, Michael & Zeckhauser, Richard, 1971. "Insurance, Information, and Individual Action," American Economic Review, American Economic Association, vol. 61(2), pages 380-87, May.
  7. Weisbrod, Burton A, 1991. "The Health Care Quadrilemma: An Essay on Technological Change, Insurance, Quality of Care, and Cost Containment," Journal of Economic Literature, American Economic Association, vol. 29(2), pages 523-52, June. [Downloadable!] (restricted)
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This page was last updated on 2009-11-13.

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