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Health and Wealth: How do They Affect Individual Preferences?

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  • Beatrice Rey

    ()

  • Jean-Charles Rochet

    ()

Abstract

There is no consensus among health economists about the specification of individual preferences that best fits observed behaviors. One crucial point of disagreement concerns the sign of the interaction between health and wealth in individual utility functions. We propose here a simple, static, model where individuals have only one decision to make concerning their future health (say to get a flu shot). We derive very simple testable implications that allow to discriminate between three specifications that are commonly used in theoretical models: additive separability between health and consumption, multiplicative separability, and existence of a monetary equivalent of health. We also derive several implications on the pattern of the demand for health insurance.

Suggested Citation

  • Beatrice Rey & Jean-Charles Rochet, 2004. "Health and Wealth: How do They Affect Individual Preferences?," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 29(1), pages 43-54, June.
  • Handle: RePEc:kap:geneva:v:29:y:2004:i:1:p:43-54
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    References listed on IDEAS

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    Cited by:

    1. Alberto Bennardo & Salvatore Piccolo, 2014. "Competitive Markets With Endogenous Health Risks," Journal of the European Economic Association, European Economic Association, vol. 12(3), pages 755-790, June.
    2. Louis Eeckhoudt & Béatrice Rey & Harris Schlesinger, 2007. "A Good Sign for Multivariate Risk Taking," Management Science, INFORMS, pages 117-124.
    3. Leiter, Andrea M. & Rheinberger, Christoph M., 2016. "Risky sports and the value of safety information," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 328-345.
    4. Asheim, Geir B. & Emblem, Anne Wenche & Nilssen, Tore, 2010. "Health insurance: Medical treatment vs disability payment," Research in Economics, Elsevier, vol. 64(3), pages 137-145, September.
    5. Mario Menegatti, 2014. "Optimal choice on prevention and cure: a new economic analysis," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(4), pages 363-372, May.

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