On the Economics of Rational Self-Medication

Wisdom Akpalu

No 6363, Sustainability Indicators and Environmental Valuation Working Papers from Fondazione Eni Enrico Mattei (FEEM)

Abstract: It has been established in the medical literature that self-medicating with imperfect information about either the use of a genuine or counterfeit drug or based on wrong self-diagnosis of ailment, which is predominant especially in developing countries, is a risky investment in health capital. This paper models the decision to self-medicate and the demand for self-medicated drugs. We suppose that investment in self-medication depends on the perception of its effectiveness. The results obtained show that the decision to self-medicate depends on the relative price and perceived effectiveness of self-medication, the elasticity of the shadow value of health with respect to the quantity of health capital, and the relative effectiveness of self-medication in reducing the unpredictable changes in health capital. Furthermore, if an individual self-medicates, self-medication becomes a normal good: it increases if income increases; and it obeys the law of demand (i.e. it increases if its price, relative to that of the risk-free medication, decreases). Moreover, we have shown that some optimum subsidy can discourage self-medication.

Keywords: Demand and Price Analysis; Health Economics and Policy; Institutional and Behavioral Economics; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 23
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemsi:6363

DOI: 10.22004/ag.econ.6363

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