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


  • Vera-Hernandez, Marcos


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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    References listed on IDEAS

    1. Trajtenberg, Manuel, 1989. "The Welfare Analysis of Product Innovations, with an Application to Computed Tomography Scanners," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 444-479, April.
    2. Austan Goolsbee & Amil Petrin, 2001. "The Consumer Gains from Direct Broadcast Satellites and the Competition with Cable Television," NBER Working Papers 8317, National Bureau of Economic Research, Inc.
    3. John Cawley & Michael Chernew & Catherine McLaughlin, 2005. "HMO Participation in Medicare+Choice," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(3), pages 543-574, September.
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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, Oxford University Press, 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.
    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. 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 Economía Aplicada, Estudios de Economía Aplicada, vol. 24, pages 731-754, Diciembre.
    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. Duarte, Fabian, 2012. "Price elasticity of expenditure across health care services," Journal of Health Economics, Elsevier, vol. 31(6), pages 824-841.
    9. Rossouw Laura, 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).

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