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
Extending the Grossman  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  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)
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)
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Persistent link: https://EconPapers.repec.org/RePEc:kyo:wpaper:696
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