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The impact of ambiguity on health prevention and insurance

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  • Johanna Etner
  • Sandrine Spaeter

Abstract

In this paper, we analyze the choice of primary prevention made by individuals who bear a risk of being in bad health and an additive risk (of complications) that occurs after a disease has been diagnosed. By considering a two argument utility (depending on wealth and health), we show that the presence of a well-known (no ambiguity) additive risk of complications induces more investment in primary prevention by a risk-averse agent only if her preferences does not display some cross prudence in wealth (u122

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Bibliographic Info

Paper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2010-08.

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Date of creation: 2010
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Handle: RePEc:ulp:sbbeta:2010-08

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Keywords: health; utility; ambiguity; prevention; insurance.;

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References

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  1. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2002. "A smooth model of decision making under ambiguity," ICER Working Papers - Applied Mathematics Series 11-2003, ICER - International Centre for Economic Research, revised Apr 2003.
  2. Doherty, Neil A & Eeckhoudt, Louis, 1995. "Optimal Insurance without Expected Utility: The Dual Theory and the Linearity of Insurance Contracts," Journal of Risk and Uncertainty, Springer, vol. 10(2), pages 157-79, March.
  3. repec:hal:cesptp:halshs-00451982 is not listed on IDEAS
  4. EECKHOUDT, louis & REY, Béatrice & SCHLESINGER, Harris, . "A good sign for multivariate risk taking," CORE Discussion Papers RP -1900, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  6. Sandrine Spaeter & Patrick Roger, 1997. "The Design of Optimal Insurance Contracts: A Topological Approach," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 22(1), pages 5-19, June.
  7. Evans, William N & Viscusi, W Kip, 1991. "Estimation of State-Dependent Utility Functions Using Survey Data," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 94-104, February.
  8. BLEICHRODT, Han & CRAINICH, David & EECKHOUDT, Louis, . "The effect of comorbidities on treatment decisions," CORE Discussion Papers RP -1668, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Raviv, Artur, 1979. "The Design of an Optimal Insurance Policy," American Economic Review, American Economic Association, vol. 69(1), pages 84-96, March.
  10. Viscusi, W Kip & Evans, William N, 1990. "Utility Functions That Depend on Health Status: Estimates and Economic Implications," American Economic Review, American Economic Association, vol. 80(3), pages 353-74, June.
  11. Valentino Dardanoni & Alan Wagstaff, 1987. "Uncertainty and the demand for medical care," Working Papers 028chedp, Centre for Health Economics, University of York.
  12. repec:hal:cesptp:halshs-00130179 is not listed on IDEAS
  13. Louis Eeckhoudt & Christian Gollier, 2005. "The impact of prudence on optimal prevention," Economic Theory, Springer, vol. 26(4), pages 989-994, November.
  14. Gajdos, T. & Hayashi, T. & Tallon, J.-M. & Vergnaud, J.-C., 2008. "Attitude toward imprecise information," Journal of Economic Theory, Elsevier, vol. 140(1), pages 27-65, May.
  15. Christophe Courbage & Béatrice Rey, 2006. "Prudence and optimal prevention for health risks," Health Economics, John Wiley & Sons, Ltd., vol. 15(12), pages 1323-1327.
  16. Christian Gollier & Harris Schlesinger, 1996. "Arrow's theorem on the optimality of deductibles: A stochastic dominance approach (*)," Economic Theory, Springer, vol. 7(2), pages 359-363.
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Cited by:
  1. Meixing Dai, 2010. "External constraint and financial crises with balance sheet effects," Working Papers of BETA 2010-23, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  2. Anwar, Sajid & Zheng, Mingli, 2012. "Competitive insurance market in the presence of ambiguity," Insurance: Mathematics and Economics, Elsevier, vol. 50(1), pages 79-84.

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