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Genetic Tests and Inter-Temporal Screening in Competitive Insurance Markets

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  • Emons Winand

    (University of Bern)

Abstract

We consider successive generations of non-altruistic individuals carrying either a good or bad gene. Daughters are more likely to inherit their mother's gene. Competitive insurers can perform a genetic test revealing an agent's gene. They can condition their quotes on the agent's or on her ancestors' genetic status. In equilibrium, generation one is bribed to take the test with an unconditional premium. The insurer uses this information to profitably screen a finite number of generations of their offspring. The offspring of good-gene carriers subsidize the tested generation.

Suggested Citation

  • Emons Winand, 2009. "Genetic Tests and Inter-Temporal Screening in Competitive Insurance Markets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-19, July.
  • Handle: RePEc:bpj:bejeap:v:9:y:2009:i:1:n:26
    DOI: 10.2202/1935-1682.2076
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    References listed on IDEAS

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    1. Tabarrok, Alexander, 1994. "Genetic testing: An economic and contractarian analysis," Journal of Health Economics, Elsevier, vol. 13(1), pages 75-91, March.
    2. Hoel, Michael & Iversen, Tor & Nilssen, Tore & Vislie, Jon, 2006. "Genetic testing in competitive insurance markets with repulsion from chance: A welfare analysis," Journal of Health Economics, Elsevier, vol. 25(5), pages 847-860, September.
    3. 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.
    4. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 629-649.
    5. Hoel, Michael & Iversen, Tor, 2002. "Genetic testing when there is a mix of compulsory and voluntary health insurance," Journal of Health Economics, Elsevier, vol. 21(2), pages 253-270, March.
    6. Fredrik Andersson, 2001. "Adverse selection and bilateral asymmetric information," Journal of Economics, Springer, vol. 74(2), pages 173-195, June.
    7. Michael Hoy, 1982. "Categorizing Risks in the Insurance Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 97(2), pages 321-336.
    8. Michael Hoy & Fabienne Orsi & François Eisinger & Jean Paul Moatti, 2003. "The Impact of Genetic Testing on Healthcare Insurance," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 28(2), pages 203-221, April.
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    Cited by:

    1. Nævdal, Eric, 2014. "Optimal screening for genetic diseases," Economics & Human Biology, Elsevier, vol. 15(C), pages 129-139.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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