Genetic testing with primary prevention and moral hazard

David Bardey and Philippe De Donder

No 9083, Documentos de Trabajo from Universidad del Rosario

Abstract: Abstract:We develop a model where a free genetic test reveals whether the individual tested has a low or high probability of developing a disease. A costly prevention effort allows high-risk agents to decrease the probability of developing the disease. Agents are not obliged to take the test, but must disclose its results to insurers. Insurers offer separating contracts which take into account the individual risk, so that taking the test is associated to a discrimination risk.We study the individual decisions to take the test and to undertake the prevention effort as a function of the effort cost and of its efficiency. We obtain that, if effort is observable by insurers, agents undertake the test only if the effort cost is neither too large nor too low. If the effort cost is not observable by insurers, they face a moral hazard problem which induces them to under-provide insurance. We obtain the counter intuitive result that moral hazard increases the value of the test if the effort cost is low enough. Also, agents may perform the test for lower levels of prevention efficiency when effort is not observable.

Keywords: discrimination risk; informational value of test; personalized medecine. (search for similar items in EconPapers)
JEL-codes: D82 G22 I18 (search for similar items in EconPapers)
Pages: 56
Date: 2011-10-31
New Economics Papers: this item is included in nep-cta and nep-hea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://repository.urosario.edu.co/bitstream/handle/10336/10955/9083.pdf

Related works:
Journal Article: Genetic testing with primary prevention and moral hazard (2013)
Working Paper: Genetic testing with primary prevention and moral hazard (2012)
Working Paper: Genetic testing with primary prevention and moral hazard (2012)
Working Paper: Genetic testing with primary prevention and moral hazard (2012)
Working Paper: Genetic testing with primary prevention and moral hazard (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000092:009083

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