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Optimal self‐insurance with genetic testing and state‐dependent utility

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  • David Crainich

    (CNRS - Centre National de la Recherche Scientifique, IÉSEG School Of Management [Puteaux], LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

Abstract

I analyze how genetic testing modifies prevention actions that reduce the health and financial consequences of disease. Specifically, I determine whether individuals adjust their prevention behaviour according to the available genetic information when insurers are allowed to use test results for rate‐making purposes (laissez‐faire) and when they are not (information ban). I show that individuals exploit genetic information in the laissez‐faire regime. In the information ban regime, they do so when separating equilibria prevail, but not in case of a pooling equilibrium. None of these equilibria, however, leads to the maximization of the social welfare function. I, therefore, discuss for each potential scenario the instruments likely to restore optimality.

Suggested Citation

  • David Crainich, 2024. "Optimal self‐insurance with genetic testing and state‐dependent utility," Post-Print hal-04864674, HAL.
    • Handle: RePEc:hal:journl:hal-04864674
    DOI: 10.1111/caje.12733
    Note: View the original document on HAL open archive server: https://hal.science/hal-04864674v1
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    References listed on IDEAS

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    Keywords

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    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
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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