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The Economics of Breakdowns, Checkups, and Cures

Listed author(s):
  • Taylor, Curtis R

A market in which the owner of a durable good, X, contracts with an expert for diagnostic and treatment services is studied. Good X may be in one of three states: health, disease, or failure. Only experts can determine whether X is healthy or diseased and perform treatment. The owner cannot tell whether recommended treatment is really needed. This creates an information-based demand for health insurance by risk-neutral consumers. Imperfections in the market for spot insurance may give rise to free diagnostic checks, strategic procrastination, and long-term health maintenance agreements. Copyright 1995 by University of Chicago Press.

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File URL: http://dx.doi.org/10.1086/261975
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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 103 (1995)
Issue (Month): 1 (February)
Pages: 53-74

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Handle: RePEc:ucp:jpolec:v:103:y:1995:i:1:p:53-74
Contact details of provider: Web page: http://www.journals.uchicago.edu/JPE/

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  1. Grossman, Sanford J. & Perry, Motty, 1986. "Perfect sequential equilibrium," Journal of Economic Theory, Elsevier, vol. 39(1), pages 97-119, June.
  2. Douglas Gale & Robert W. Rosenthal, 1992. "Price and Quality Cycles for Experience Goods," Papers 0035, Boston University - Industry Studies Programme.
  3. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-255, March-Apr.
  4. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-329, March-Apr.
  5. Paul R. Milgrom., 1987. "Employment Contracts, Influence Activities and Efficient Organization Design," Economics Working Papers 8741, University of California at Berkeley.
  6. Pitchik, Carolyn & Schotter, Andrew, 1987. "Honesty in a Model of Strategic Information Transmission," American Economic Review, American Economic Association, vol. 77(5), pages 1032-1036, December.
  7. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-641, August.
  8. Paul Milgrom & John Roberts, 1986. "Relying on the Information of Interested Parties," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 18-32, Spring.
  9. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
  10. Anonymous, 1993. "Food Research Institute Studies Index," Food Research Institute Studies, Stanford University, Food Research Institute, issue 03.
  11. Asher Wolinsky, 1991. "Competition in a Market for Informed Experts' Services," Discussion Papers 959, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. Russell Cooper & Thomas W. Ross, 1985. "Product Warranties and Double Moral Hazard," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 103-113, Spring.
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