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

David Crainich
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David Crainich: CNRS - Centre National de la Recherche Scientifique, IÉSEG School Of Management [Puteaux], LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - ULCO - Université du Littoral Côte d'Opale - 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.

Keywords: Health insurance; Adverse selection; Self-insurance; JEL Classification: D82; I18 Genetic testing; I18 Genetic testing Self-insurance Adverse selection Health insurance (search for similar items in EconPapers)
Date: 2024-08-16
New Economics Papers: this item is included in nep-hea
Note: View the original document on HAL open archive server: https://hal.science/hal-04864674v1
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Published in Canadian Journal of Economics / Revue Canadienne d'Économique, 2024, 58 (2), pp.418-442. ⟨10.1111/caje.12733⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04864674

DOI: 10.1111/caje.12733

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