Motivated Health Risk Denial and Preventative Health Care Investments

Peter Schwardmann

No 33, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

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.

Keywords: health risk denial; optimal expectations; motivated beliefs; disease prevention; self-protection (search for similar items in EconPapers)
JEL-codes: D03 I11 I15 I18 (search for similar items in EconPapers)
Date: 2017-05-20
New Economics Papers: this item is included in nep-hea
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Citations: View citations in EconPapers (4)

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Journal Article: Motivated health risk denial and preventative health care investments (2019)
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