How is the Trade-Off between Adverse Selection and Discrimination Risk Affected by Genetic Testing? Theory and Experiment
49 Pages Posted: 23 Mar 2017
Date Written: March 15, 2017
We compare two genetic testing regulations, Disclosure Duty (DD) and Consent Law (CL), in an environment where individuals choose to take a genetic test or not. DD forces agents to reveal the test results to their insurers, resulting in a discrimination risk. CL allows agents to withhold that information, generating adverse selection. We complement our model with an experiment. We obtain that a larger fraction of agents test under CL than under DD, and that the proportion of individuals preferring CL to DD is non-monotone in the test cost when adverse selection is set endogenously at its steady state level.
Keywords: Consent Law, Disclosure Duty, Personalized Medicine, Test take up rate, pooling health insurance contracts
JEL Classification: C91, D82, I18
Suggested Citation: Suggested Citation