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Health Values, Preference Inconsistency, and Insurance Demand

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  • Matthias Wrede

Abstract

Several empirical studies provide evidence that their actual health state affects people’s attitudes towards health and medical care in hypothetical health states. In the tradition of behavioural economics this paper considers the actual health state as a point of reference and builds a model for studying the implications of this phenomenon on health insurance and on demand for medical care. It considers the insurance demand of different types of agents: naive individuals, individuals who are able to commit to medical care demand and sophisticated individuals. Furthermore, it raises the question of whether inconsistency of preferences reinforces or tones down moral hazard problems.

Suggested Citation

  • Matthias Wrede, 2005. "Health Values, Preference Inconsistency, and Insurance Demand," CESifo Working Paper Series 1634, CESifo.
    • Handle: RePEc:ces:ceswps:_1634
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp1634.pdf
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    References listed on IDEAS

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    1. Koszegi, Botond, 2003. "Health anxiety and patient behavior," Journal of Health Economics, Elsevier, vol. 22(6), pages 1073-1084, November.
    2. Joseph T. King Jr. & Joel Tsevat & Mark S. Roberts, 2004. "Positive Association between Current Health and Health Values for Hypothetical Disease States," Medical Decision Making, , vol. 24(4), pages 367-378, August.
    3. Kopczuk Wojciech & Slemrod Joel, 2005. "Denial of Death and Economic Behavior," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 5(1), pages 1-26, August.
    4. Philip J. Cook & Daniel A. Graham, 1977. "The Demand for Insurance and Protection: The Case of Irreplaceable Commodities," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 91(1), pages 143-156.
    5. Paul Dolan, 1999. "Whose Preferences Count?," Medical Decision Making, , vol. 19(4), pages 482-486, October.
    6. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 443-478.
    7. Jonathan R. Treadwell & Leslie A. Lenert, 1999. "Health Values and Prospect Theory," Medical Decision Making, , vol. 19(3), pages 344-352, August.
    8. Blomqvist, Ake, 1997. "Optimal non-linear health insurance," Journal of Health Economics, Elsevier, vol. 16(3), pages 303-321, June.
    9. Diamond, Peter & Koszegi, Botond, 2003. "Quasi-hyperbolic discounting and retirement," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1839-1872, September.
    10. Spence, Michael & Zeckhauser, Richard, 1971. "Insurance, Information, and Individual Action," American Economic Review, American Economic Association, vol. 61(2), pages 380-387, May.
    11. Norton, Edward C., 2000. "Long-term care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 17, pages 955-994, Elsevier.
    12. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    13. Norman F. Boyd & Heather J. Sutherland & Karen Z. Heasman & David L. Tritchler & Bernard J. Cummings, 1990. "Whose Utilities for Decision Analysis?," Medical Decision Making, , vol. 10(1), pages 58-67, February.
    14. Richard G. Frank, 2004. "Behavioral Economics and Health Economics," NBER Working Papers 10881, National Bureau of Economic Research, Inc.
    15. Diana Stratmann-Schoene & Thomas Klose, 2001. "Health Values and Prospect Theory," Medical Decision Making, , vol. 21(1), pages 57-59, February.
    16. Zeckhauser, Richard, 1970. "Medical insurance: A case study of the tradeoff between risk spreading and appropriate incentives," Journal of Economic Theory, Elsevier, vol. 2(1), pages 10-26, March.
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    Cited by:

    1. Heijdra, Ben J. & Ligthart, Jenny E., 2010. "The Transitional Dynamics Of Fiscal Policy In Small Open Economies," Macroeconomic Dynamics, Cambridge University Press, vol. 14(1), pages 1-28, February.
    2. repec:dau:papers:123456789/179 is not listed on IDEAS

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    Keywords

    health insurance; medical care; health state; behavioural economics; prospect theory; time inconsistency;
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