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Structural Estimation of a Principal-Agent Model: Moral Hazard in Medical Insurance

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  • Vera-Hernandez, Marcos

Abstract

Despite the importance of principal-agent models in the development of modern economic theory, there are few estimations of these models. I recover the estimates of a principal-agent model and obtain an approximation to the optimal contract. The results show that out-of-pocket payments follow a concave profile with respect to costs of treatment. I estimate the welfare loss due to moral hazard, taking into account income effects. I also propose a new measure of moral hazard based on the conditional correlation between contractible and noncontractible variables. Copyright 2003 by the RAND Corporation.

Suggested Citation

  • Vera-Hernandez, Marcos, 2003. "Structural Estimation of a Principal-Agent Model: Moral Hazard in Medical Insurance," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 670-693, Winter.
    • Handle: RePEc:rje:randje:v:34:y:2003:i:4:p:670-93
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    Cited by:

    1. Zarek C. Brot-Goldberg & Amitabh Chandra & Benjamin R. Handel & Jonathan T. Kolstad, 2017. "What does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(3), pages 1261-1318.
    2. Wagstaff, Adam & Pradhan, Menno, 2005. "Health insurance impacts on health and nonmedical consumption in a developing country," Policy Research Working Paper Series 3563, The World Bank.
    3. Hyojoung Kim & Doyoung Kim & Subin Im & James W. Hardin, 2009. "Evidence of Asymmetric Information in the Automobile Insurance Market: Dichotomous Versus Multinomial Measurement of Insurance Coverage," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(2), pages 343-366, June.
    4. Vedel, Suzanne Elizabeth & Jacobsen, Jette Bredahl & Thorsen, Bo Jellesmark, 2015. "Contracts for afforestation and the role of monitoring for landowners’ willingness to accept," Forest Policy and Economics, Elsevier, vol. 51(C), pages 29-37.
    5. Zheng, Yan & Vukina, Tomislav & Zheng, Xiaoyong, 2016. "Estimating Asymmetric Information Effects in Health Care Accounting for the Transactions Costs," ARE Working Papers 262941, North Carolina State University, Department of Agricultural and Resource Economics.
    6. Jianmei Zhao & Hai Zhong, 2015. "Medical expenditure in urban China: a quantile regression analysis," International Journal of Health Economics and Management, Springer, vol. 15(4), pages 387-406, December.
    7. Olivella, Pau & Vera-Hernandez, Marcos, 2007. "Competition among differentiated health plans under adverse selection," Journal of Health Economics, Elsevier, vol. 26(2), pages 233-250, March.
    8. Svetlana Pashchenko & Ponpoje Porapakkarm, 2019. "Reducing Medical Spending of the Publicly Insured: The Case for a Cash-out Option," American Economic Journal: Economic Policy, American Economic Association, vol. 11(3), pages 390-426, August.
    9. Laura Rossouw, 2015. "Poor Health Reporting: Do Poor South Africans Underestimate Their Health Needs?," WIDER Working Paper Series wp-2015-027, World Institute for Development Economic Research (UNU-WIDER).
    10. Nur Kaynar & Auyon Siddiq, 2023. "Estimating Effects of Incentive Contracts in Online Labor Platforms," Management Science, INFORMS, vol. 69(4), pages 2106-2126, April.
    11. Sun, Huan & Wang, Haiyan & Steffensen, Sonja, 2022. "Mechanism design of multi-strategy health insurance plans under asymmetric information," Omega, Elsevier, vol. 107(C).
    12. Laura Rossouw, 2015. "Poor health reporting: Do poor South Africans underestimate their health needs?," WIDER Working Paper Series 027, World Institute for Development Economic Research (UNU-WIDER).
    13. Yan Zheng & Tomislav Vukina & Xiaoyong Zheng, 2019. "Estimating asymmetric information effects in health care with uninsurable costs," International Journal of Health Economics and Management, Springer, vol. 19(1), pages 79-98, March.
    14. Pedro Rosa Dias, 2010. "Modelling opportunity in health under partial observability of circumstances," Health Economics, John Wiley & Sons, Ltd., vol. 19(3), pages 252-264, March.
    15. Navarro Espigares, José Luis & Hernández Torres, Elisa, 2006. "Health Technologies Assessment: Analysing The Role Of Uncertainty/Evaluación De Tecnologías Sanitarias: Análisis Del Papel De La Incertidumbre," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 24, pages 731-754, Diciembre.
    16. Nitin Mehta & Jian Ni & Kannan Srinivasan & Baohong Sun, 2017. "A Dynamic Model of Health Insurance Choices and Healthcare Consumption Decisions," Marketing Science, INFORMS, vol. 36(3), pages 338-360, May.
    17. Duarte, Fabian, 2012. "Price elasticity of expenditure across health care services," Journal of Health Economics, Elsevier, vol. 31(6), pages 824-841.

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