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Motivated health risk denial and preventative health care investments

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  • Schwardmann, Peter

Abstract

People deny health risks, invest too little in disease prevention, and are highly sensitive to the price of preventative health care, especially in developing countries. Moreover, private sector R&D spending on developing-country diseases is almost non-existent. To explain these empirical observations, I propose a model of motivated belief formation, in which an agent's decision to engage in health risk denial balances the psychological benefits of reduced anxiety with the physical cost of underprevention. I use the model to study firms’ price-setting behavior and incentive to innovate. I also show that tax-funded prevention subsidies are welfare enhancing.

Suggested Citation

  • Schwardmann, Peter, 2019. "Motivated health risk denial and preventative health care investments," Journal of Health Economics, Elsevier, vol. 65(C), pages 78-92.
  • Handle: RePEc:eee:jhecon:v:65:y:2019:i:c:p:78-92
    DOI: 10.1016/j.jhealeco.2019.01.005
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    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Economics of Welfare > Health Economics > Economics of Pandemics > Policy responses > Behavioral

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    Cited by:

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    2. Victor Augias & Daniel M A Barreto, 2022. "Persuading a Wishful Thinker," SciencePo Working papers Main hal-04066849, HAL.
    3. Luc Bridet & Peter Schwardmann, 2020. "Selling Dreams: Endogenous Optimism in Lending Markets," CESifo Working Paper Series 8271, CESifo.
    4. Davide Pace & Joël van der Weele, 2020. "Curbing Carbon: An Experiment on Uncertainty and Information about CO2 emissions," Tinbergen Institute Discussion Papers 20-059/I, Tinbergen Institute.
    5. Jeanne Hagenbach & Charlotte Saucet, 2022. "Motivated Skepticism," Working Papers hal-03770685, HAL.
    6. Hestermann, Nina & Le Yaouanq, Yves & Treich, Nicolas, 2020. "An economic model of the meat paradox," European Economic Review, Elsevier, vol. 129(C).
    7. Edika Quispe-Torreblanca & John Gathergood & George Loewenstein & Neil Stewart, 2020. "Attention Utility: Evidence from Individual Investors," CESifo Working Paper Series 8091, CESifo.
    8. Balietti, Anca & Budjan, Angelika & Eymess, Tillmann, 2023. "Perceived Relative Income and Preferences for Public Good Provision," Working Papers 0729, University of Heidelberg, Department of Economics.
    9. Jeanne Hagenbach & Charlotte Saucet, 2022. "Motivated Skepticism," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-03770685, HAL.
    10. Jan Engelmann & Maël Lebreton & Peter Schwardmann & Joël van der Weele & Li-Ang Chang, 2019. "Anticipatory Anxiety and Wishful Thinking," Tinbergen Institute Discussion Papers 19-042/I, Tinbergen Institute.
    11. Ziebarth Nicolas R., 2018. "Biased Lung Cancer Risk Perceptions: Smokers are Misinformed," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 238(5), pages 395-421, September.
    12. Jeanne Hagenbach & Charlotte Saucet, 2022. "Motivated Skepticism," SciencePo Working papers Main hal-03770685, HAL.
    13. Bicchieri, Cristina & Dimant, Eugen & Sonderegger, Silvia, 2023. "It's not a lie if you believe the norm does not apply: Conditional norm-following and belief distortion," Games and Economic Behavior, Elsevier, vol. 138(C), pages 321-354.

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    More about this item

    Keywords

    Motivated beliefs; Self-deception; Disease prevention; Self-protection;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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