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Acquisition and disclosure of genetic information under alternative policy regimes

  • Deborah Wilson

    ()

A current policy issue is whether, and if so under what circumstances, insurance companies should be given access to genetic test results. The insurance industry argues for mandatory disclosure in order to avoid problems of adverse selection; genetic interest groups argue for a moratorium or legislation preventing such disclosure; a third option would be a voluntary consent law. The purpose of this paper is to investigate the impact of alternative policies on individuals’ incentives to both acquire genetic information and to disclose it to insurers. The theoretical framework used to inform this analysis is provided by the ‘games of persuasion’ literature, in which one agent tries to influence another agent’s decision by selectively withholding her private information regarding quality. The application of the theoretical framework to this policy context yields surprising results. Individuals have the incentive to acquire genetic information and to disclose the test results if disclosure is voluntary. If, however, they are obliged to disclose the results of any genetic tests they have taken, their incentive may be not to acquire such information. I discuss the policy implications of these findings both from the point of view of the insurance industry and from a public health perspective.

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File URL: http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp118.pdf
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Paper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 05/118.

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Length: 13 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:bri:cmpowp:05/118
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  1. Doherty, Neil A. & Thistle, Paul D., 1996. "Adverse selection with endogenous information in insurance markets," Journal of Public Economics, Elsevier, vol. 63(1), pages 83-102, December.
  2. Frédéric KOESSLER, 2001. "Persuasion Games with Higher Order Uncertainty," Working Papers of BETA 2001-14, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  3. Diego Ossa & Adrian Towse, 2004. "Genetic screening, health care and the insurance industry," The European Journal of Health Economics, Springer, vol. 5(2), pages 116-121, May.
  4. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
  5. Tabarrok, Alexander, 1994. "Genetic testing: An economic and contractarian analysis," Journal of Health Economics, Elsevier, vol. 13(1), pages 75-91, March.
  6. Mark V. Pauly & Kate H. Withers & Krupa Subramanian-Viswana & Jean Lemaire & John C. Hershey, 2003. "Price Elasticity of Demand for Term Life Insurance and Adverse Selection," NBER Working Papers 9925, National Bureau of Economic Research, Inc.
  7. David M. Cutler, 1996. "Public Policy for Health Care," NBER Working Papers 5591, National Bureau of Economic Research, Inc.
  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. Steven Shavell, 1994. "Acquisition and Disclosure of Information Prior to Sale," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 20-36, Spring.
  10. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
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