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Motivated health risk denial and preventative health care investments

Peter Schwardmann

Journal of Health Economics, 2019, vol. 65, issue C, 78-92

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&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 behavior and incentive to innovate. I also show that tax-funded prevention subsidies are welfare enhancing.

Keywords: Motivated beliefs; Self-deception; Disease prevention; Self-protection (search for similar items in EconPapers)
JEL-codes: D03 I15 I11 I18 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Motivated Health Risk Denial and Preventative Health Care Investments (2017) Downloads
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DOI: 10.1016/j.jhealeco.2019.01.005

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Journal of Health Economics is currently edited by J. P. Newhouse, A. J. Culyer, R. Frank, K. Claxton and T. McGuire

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