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Health Insurance and Consumer Welfare : The Case of Monopolistic Drug Markets

  • Anlauf, Markus
  • Wigger, Berthold U.
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    Individual moral hazard engendered by health insurance and monopolistic production are both typical phenomena of drug markets. We develop a simple model containing these two elements and show that private agents tend to overinsure themselves against health respectively drug expenses if drugs can be produced at low marginal costs. If marginal costs are negligible, health insurance should be abandoned at all.

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    File URL: https://ub-madoc.bib.uni-mannheim.de/1045/1/565.pdf
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    Paper provided by Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre in its series Discussion Papers with number 565.

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    Date of creation: 1999
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    Handle: RePEc:mnh:vpaper:1045
    Contact details of provider: Postal: D-68131 Mannheim
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    Web page: http://www.vwl.uni-mannheim.de/institut/
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    1. Chiu, W. Henry, 1997. "Health insurance and the welfare of health care consumers," Journal of Public Economics, Elsevier, vol. 64(1), pages 125-133, April.
    2. Pauly, Mark V, 1974. "Overinsurance and Public Provision of Insurance: The Roles of Moral Hazard and Adverse Selection," The Quarterly Journal of Economics, MIT Press, vol. 88(1), pages 44-62, February.
    3. Feldman, Roger & Dowd, Bryan, 1991. "A New Estimate of the Welfare Loss of Excess Health Insurance," American Economic Review, American Economic Association, vol. 81(1), pages 297-301, March.
    4. Feldstein, Martin S, 1973. "The Welfare Loss of Excess Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 251-80, Part I, M.
    5. Blomqvist, Ake, 1991. "The doctor as double agent: Information asymmetry, health insurance, and medical care," Journal of Health Economics, Elsevier, vol. 10(4), pages 411-432.
    6. Blomqvist, Ake, 1997. "Optimal non-linear health insurance," Journal of Health Economics, Elsevier, vol. 16(3), pages 303-321, June.
    7. Weisbrod, Burton A, 1991. "The Health Care Quadrilemma: An Essay on Technological Change, Insurance, Quality of Care, and Cost Containment," Journal of Economic Literature, American Economic Association, vol. 29(2), pages 523-52, June.
    8. Spence, Michael & Zeckhauser, Richard, 1971. "Insurance, Information, and Individual Action," American Economic Review, American Economic Association, vol. 61(2), pages 380-87, May.
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