Existence of an Asymmetric Information Structure in Gene Diagnosis -the Mechanism by which Genetic Discrimination is Induced-

Nobuyuki Soga
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Nobuyuki Soga: Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan

No 112, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: In this paper, equilibrium of the life/medical insurance market is analyzed under conditions where insurers demands that an insurant undergo genetic testing, on the assumption that the Human Genome Project will allow direct insight into the precise manner of operation of individual genes. Also, equilibrium in this instance is studied with attention given to the existence of an asymmetric structure of information between an insurant and insurers, even if the insurers are able to propose a contract based on knowledge of the results of genetic testing. The model described in this paper led to the conclusion that equilibrium can exist in any instance. In this paper, I also show that there exists equilibrium totally opposite to that shown as a result of adverse selection depending on change in the ratio of individuals undergoing genetic testing, and on the basis of such equilibrium I discuss the mechanism which causes "genetic discrimination" which is increasingly being regarded as a potential problem.

Keywords: Genetic Testing; Genetic Discrimination; Adverse Selection; Risk Selection; Insurance Markets (search for similar items in EconPapers)
JEL-codes: D82 I10 O31 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2000-06
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