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Risk and Uncertainty in Health Investment

Takao Asano () and Akihisa Shibata ()
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Takao Asano: Faculty of Economics, Okayama University

No 696, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: Extending the Grossman [12] model of health capital into a stochastic one, we analyze how the presence of Knightian uncertainty about the efficacy of health care affects the optimal health investment behavior of individuals. Using Gilboa and Schmeidler's [11] model of maxmin expected utility (MMEU) with multiple priors, we show that an agent retains the initial level of health capital if the price of health care lies within a certain range. We also show that the no-investment range expands as the degree of Knightian uncertainty rises.

Keywords: Health Investment; Risk; Uncertainty (search for similar items in EconPapers)
JEL-codes: D81 I11 (search for similar items in EconPapers)
Pages: 18pages
Date: 2010-03
New Economics Papers: this item is included in nep-hea and nep-upt
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Journal Article: Risk and uncertainty in health investment (2011) Downloads
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