Motivated health risk denial and preventative health care investments

Peter Schwardmann

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: People deny health risks, invest too little in disease prevention, and are highly sensitive to the price of preventative health care, especially in developing countries. Moreover, private sector R&D spending on developing-country diseases is almost non-existent. To explain these empirical observations, I propose a model of motivated belief formation, in which an agent's decision to engage in health risk denial balances the psychological benefits of reduced anxiety with the physical cost of underprevention. I use the model to study firms' price-setting behavior and incentive to innovate. I also show that tax-funded prevention subsidies are welfare enhancing. (C) 2019 Elsevier B.V. All rights reserved.

Date: 2019
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Citations: View citations in EconPapers (19)

Published in Journal of Health Economics 65(2019): pp. 78-92

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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:78288

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