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Motivated Health Risk Denial and Preventative Health Care Investments

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  • Schwardmann, Peter

    (University of Munich)

Abstract

People deny health risks, invest too little in disease prevention, and are highly sensitive to the price of preventative health care, especially in developing countries. Moreover, private sector R and D spending on developing-country diseases is almost non-existent. To explain these empirical observations, I propose a model of motivated belief formation, in which an agent\'s decision to engage in health risk denial balances the psychological benefits of reduced anxiety with the physical cost of underprevention. I use the model to study firms\' price-setting behaviour and incentive to innovate. I also show that tax-funded prevention subsidies are welfare enhancing.

Suggested Citation

  • Schwardmann, Peter, 2017. "Motivated Health Risk Denial and Preventative Health Care Investments," Rationality and Competition Discussion Paper Series 33, CRC TRR 190 Rationality and Competition.
  • Handle: RePEc:rco:dpaper:33
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    Cited by:

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    2. Hestermann, Nina & Le Yaouanq, Yves & Treich, Nicolas, 2020. "An economic model of the meat paradox," European Economic Review, Elsevier, vol. 129(C).
    3. Victor Augias & Daniel M A Barreto, 2022. "Persuading a Wishful Thinker," Working Papers hal-04066849, HAL.
    4. Bicchieri, Cristina & Dimant, Eugen & Sonderegger, Silvia, 2023. "It's not a lie if you believe the norm does not apply: Conditional norm-following and belief distortion," Games and Economic Behavior, Elsevier, vol. 138(C), pages 321-354.
    5. Jeanne Hagenbach & Charlotte Saucet, 2022. "Motivated Skepticism," Working Papers hal-03770685, HAL.
    6. Victor Augias & Daniel M A Barreto, 2022. "Persuading a Wishful Thinker," SciencePo Working papers Main hal-04066849, HAL.
    7. Luc Bridet & Peter Schwardmann, 2020. "Selling Dreams: Endogenous Optimism in Lending Markets," CESifo Working Paper Series 8271, CESifo.
    8. Edika Quispe-Torreblanca & John Gathergood & George Loewenstein & Neil Stewart, 2020. "Attention Utility: Evidence from Individual Investors," CESifo Working Paper Series 8091, CESifo.
    9. Ziebarth Nicolas R., 2018. "Biased Lung Cancer Risk Perceptions: Smokers are Misinformed," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 238(5), pages 395-421, September.
    10. repec:awi:wpaper:0729 is not listed on IDEAS
    11. Jeanne Hagenbach & Charlotte Saucet, 2022. "Motivated Skepticism," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-03770685, HAL.
    12. Davide Pace & Joël van der Weele, 2020. "Curbing Carbon: An Experiment on Uncertainty and Information about CO2 emissions," Tinbergen Institute Discussion Papers 20-059/I, Tinbergen Institute.
    13. Jan Engelmann & Maël Lebreton & Peter Schwardmann & Joël van der Weele & Li-Ang Chang, 2019. "Anticipatory Anxiety and Wishful Thinking," Tinbergen Institute Discussion Papers 19-042/I, Tinbergen Institute.

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    More about this item

    Keywords

    health risk denial; optimal expectations; motivated beliefs; disease prevention; self-protection;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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