How is the Trade-Off between Adverse Selection and Discrimination Risk Affected by Genetic Testing? Theory and Experiment
47 Pages Posted: 18 Apr 2017
Date Written: April 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: C910, D820, I180
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