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Optimal choice of prevention and cure under uncertainty on disease effect and cure effectiveness

Marco Brianti, Marco Magnani and Mario Menegatti

Research in Economics, 2018, vol. 72, issue 2, 327-342

Abstract: This paper studies optimal prevention and cure when an agent copes with two different sources of uncertainty: uncertainty on disease effect and uncertainty on cure effectiveness. We first analyze how optimal choices are affected by uncertainty when prevention and cure do not interact. Under both types of uncertainty, we obtain that the optimal level of prevention rises. Furthermore, we characterize for each source of uncertainty the conditions for the optimal level of cure to increase. We show that these conditions are related to different measures of prudence in health and cross-prudence in wealth. Lastly, we generalize our results to the case where prevention and cure interact and characterize for each source of uncertainty the conditions for the optimal level of prevention and cure to jointly increase. These conditions are similar to those obtained in the case without uncertainty but, in this context, Edgeworth–Pareto complementarity is also required.

Keywords: Prevention; Cure; Uncertainty on disease effect; Uncertainty on cure effectiveness (search for similar items in EconPapers)
Date: 2018
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