A Mean-Variance Portfolio Analysis of the Demand and Supply of a Potentially Infectious Service

Amnon Levy

Economics Working Papers from School of Economics, University of Wollongong, NSW, Australia

Abstract: A health-risking illegal personal service is transacted when the expected extra satisfaction rate exceeds the ratio of the expected extra cost to the legal service price. Its prevalence decreases with the costs of risk bearing for the providers and clients. Law-enforcement effort lowers (raises) the equilibrium price of the illegal and hazardous service when the ratio of the providers’ and the clients’ degrees of absolute risk aversion is greater (smaller) than the ratio of the law-enforcement elasticities of their cost bearing.

Keywords: Unsafe service; Health risk; Legal risk; Law enforcement (search for similar items in EconPapers)
JEL-codes: D4 D8 I1 K4 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2007
New Economics Papers: this item is included in nep-hea, nep-ias, nep-law and nep-reg
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