Moral Hazard, Optimal Healthcare-Seeking Behavior, and Competitive Equilibrium
Expert Journal of Economics, 2017, vol. 5, issue 2, 71-79
The theory of the optimal-consumption leisure choice under price dispersion describes the phenomenon of moral hazard as the customer’s reaction on unfair insurance policy. The unfair insurance offer does not equalize marginal costs of propensity to seek healthcare with marginal benefits on purchase. Under unfair insurance policy consumers increase ex post healthcare seeking activities and they optimize their consumption of medical services. The analysis of moral hazard results in the assumption that the increase in the time horizon of the unfair insurance offer makes it fair and moral hazard becomes inefficient. The time horizon competition between insurance companies can eliminate moral hazard effect that clears the way to the competitive equilibrium.
Keywords: health insurance; moral hazard; healthcare seeking behavior; optimal consumption-leisure choice (search for similar items in EconPapers)
JEL-codes: D11 D81 I13 (search for similar items in EconPapers)
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Working Paper: Moral hazard, optimal healthcare-seeking behavior, and competitive equilibrium (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:exp:econcs:v:5:y:2017:i:2:p:71-79
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