IDEAS home Printed from https://ideas.repec.org/p/col/000089/009798.html
   My bibliography  Save this paper

Genetic testing with primary prevention and moral hazard

Author

Listed:
  • David Bardey

    ()

  • Philippe De Donder

    ()

Abstract

We develop a model where a genetic test reveals whether an individual has a low or high probability of developing a disease. A costly prevention effort allows high-risk agents to decrease this probability. Agents are not obliged to take the test, but must disclose its results to insurers, and taking the test is associated to a discrimination risk.We study the individual decisions to take the test and to undertake the prevention effort as a function of the effort cost and of its efficiency. If effort is observable by insurers, agents undertake the test only if the effort cost is neither too large nor toolow. If the effort cost is not observable by insurers, moral hazard increases the valueof the test if the effort cost is low. We offer several policy recommendations, from theoptimal breadth of the tests to policies to do away with the discrimination risk.

Suggested Citation

  • David Bardey & Philippe De Donder, 2012. "Genetic testing with primary prevention and moral hazard," DOCUMENTOS CEDE 009798, UNIVERSIDAD DE LOS ANDES-CEDE.
  • Handle: RePEc:col:000089:009798
    as

    Download full text from publisher

    File URL: http://economia.uniandes.edu.co/publicaciones/dcede2012-10.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Dionne, Georges & Eeckhoudt, Louis, 1985. "Self-insurance, self-protection and increased risk aversion," Economics Letters, Elsevier, vol. 17(1-2), pages 39-42.
    2. Hoel, Michael & Iversen, Tor & Nilssen, Tore & Vislie, Jon, 2006. "Genetic testing in competitive insurance markets with repulsion from chance: A welfare analysis," Journal of Health Economics, Elsevier, vol. 25(5), pages 847-860, September.
    3. Francesca Barigozzi & Dominique Henriet, 2011. "Genetic Information: Comparing Alternative Regulatory Approaches When Prevention Matters," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(1), pages 23-46, February.
    4. Strohmenger, R. & Wambach, A., 2000. "Adverse selection and categorical discrimination in the health insurance markets: the effects of genetic tests," Journal of Health Economics, Elsevier, vol. 19(2), pages 197-218, March.
    5. Hoy, Michael & Polborn, Mattias, 2000. "The value of genetic information in the life insurance market," Journal of Public Economics, Elsevier, vol. 78(3), pages 235-252, November.
    6. Steven Shavell, 1979. "On Moral Hazard and Insurance," The Quarterly Journal of Economics, Oxford University Press, vol. 93(4), pages 541-562.
    7. Hoel, Michael & Iversen, Tor, 2002. "Genetic testing when there is a mix of compulsory and voluntary health insurance," Journal of Health Economics, Elsevier, vol. 21(2), pages 253-270, March.
    8. repec:adr:anecst:y:2006:i:83-84:p:14 is not listed on IDEAS
    9. Lilia Filipova & Michael Hoy, 2009. "Impact of Genetic Testing on Surveillance and Prevention," Working Papers 0904, University of Guelph, Department of Economics and Finance.
    10. Dhaval Dave & Robert Kaestner, 2009. "Health insurance and ex ante moral hazard: evidence from Medicare," International Journal of Health Economics and Management, Springer, vol. 9(4), pages 367-390, December.
    11. Hoy, Michael, 1989. "The value of screening mechanisms under alternative insurance possibilities," Journal of Public Economics, Elsevier, vol. 39(2), pages 177-206, July.
    12. Ray Rees & Patricia Apps, 2006. "Genetic testing, income distribution and insurance markets, CHERE Working Paper 2006/3," Working Papers 2006/3, CHERE, University of Technology, Sydney.
    13. Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, vol. 61(4), pages 561-574, September.
    14. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-648, July-Aug..
    15. David Crainich, 2015. "Self-Insurance With Genetic Testing Tools," Post-Print hal-01533549, HAL.
    16. Bardey, David & Lesur, Romain, 2005. "Optimal health insurance contract: Is a deductible useful?," Economics Letters, Elsevier, vol. 87(3), pages 313-317, June.
    17. Cochrane, John H, 1995. "Time-Consistent Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 445-473, June.
    18. 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.
    19. Tabarrok, Alexander, 1994. "Genetic testing: An economic and contractarian analysis," Journal of Health Economics, Elsevier, vol. 13(1), pages 75-91, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Goulão Catarina & Thibault Emmanuel, 2013. "Physical Activity and Policy Recommendations: A Social Multiplier Approach," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(2), pages 577-612, November.
    2. David Bardey & Philippe De Donder & César Mantilla, 2017. "How Is the Trade-off between Adverse Selection and Discrimination Risk Affected by Genetic Testing? Theory and Experiment," DOCUMENTOS CEDE 015465, UNIVERSIDAD DE LOS ANDES-CEDE.
    3. Simeon Schudy & Verena Utikal, 2012. "The Influence of (Im)perfect Data Privacy on the Acquisition of Personal Health Data," Working Paper Series of the Department of Economics, University of Konstanz 2012-12, Department of Economics, University of Konstanz.
    4. Johan N.M. Lagerlöf & Christoph Schotmüller, 2013. "Monopoly Insurance with Endogenous Information," Discussion Papers 13-15, University of Copenhagen. Department of Economics.
    5. repec:gam:jgames:v:9:y:2018:i:1:p:14-:d:134809 is not listed on IDEAS
    6. Filipova-Neumann, Lilia & Hoy, Michael, 2014. "Managing genetic tests, surveillance, and preventive medicine under a public health insurance system," Journal of Health Economics, Elsevier, vol. 34(C), pages 31-41.
    7. Fernando Antoñanzas & Carmelo A. Juárez-Castelló & Roberto Rodríguez-Ibeas, 2016. "Implementing personalized medicine with asymmetric information on prevalence rates," Health Economics Review, Springer, vol. 6(1), pages 1-8, December.
    8. repec:bla:jrinsu:v:84:y:2017:i:1:p:73-94 is not listed on IDEAS
    9. David Bardey & Philippe De Donder & Cesar Mantilla, 2014. "Adverse Selection vs Discrimination Risk with Genetic Testing. An Experimental Approach," CESifo Working Paper Series 5080, CESifo Group Munich.
    10. repec:eee:jhecon:v:55:y:2017:i:c:p:95-107 is not listed on IDEAS
    11. Simeon Schudy & Verena Utikal, 2015. "Does imperfect data privacy stop people from collecting personal health data?," TWI Research Paper Series 98, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    12. Christine Arentz, 2012. "Auswirkungen von Gentests in der Krankenversicherung," Otto-Wolff-Institut Discussion Paper Series 04/2012, Otto-Wolff-Institut für Wirtschaftsordnung, Köln, Deutschland.

    More about this item

    Keywords

    discrimination risk; informational value of test; personalized medicine.;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:col:000089:009798. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Universidad De Los Andes-Cede). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.