Optimal self‐insurance with genetic testing and state‐dependent utility

David Crainich
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David Crainich: LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique

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Abstract: I analyze how genetic testing modifies prevention actions that reduce the health and financial consequences of disease. Specifically, I determine whether individuals adjust their prevention behaviour according to the available genetic information when insurers are allowed to use test results for rate‐making purposes (laissez‐faire) and when they are not (information ban). I show that individuals exploit genetic information in the laissez‐faire regime. In the information ban regime, they do so when separating equilibria prevail, but not in case of a pooling equilibrium. None of these equilibria, however, leads to the maximization of the social welfare function. I, therefore, discuss for each potential scenario the instruments likely to restore optimality.

Date: 2024-08-16
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Published in Canadian Journal of Economics / Revue Canadienne d'Économique, 2024, ⟨10.1111/caje.12733⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04814489

DOI: 10.1111/caje.12733

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