How is the Trade-Off between Adverse Selection and Discrimination Risk Affected by Genetic Testing? Theory and Experiment

47 Pages Posted: 18 Apr 2017

See all articles by David Bardey

David Bardey

Universidad de los Andes, Colombia - Department of Economics

Philippe De Donder

University of Toulouse 1 - Toulouse School of Economics (TSE)

Cesar Mantilla

Universidad del Rosario; Institute for Advanced Study in Toulouse

Multiple version iconThere are 2 versions of this paper

Date Written: April 2017

Abstract

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

Suggested Citation

Bardey, David and De Donder, Philippe and Mantilla, Cesar, How is the Trade-Off between Adverse Selection and Discrimination Risk Affected by Genetic Testing? Theory and Experiment (April 2017). CESifo Working Paper Series No. 6402, Available at SSRN: https://ssrn.com/abstract=2954518

David Bardey

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

Philippe De Donder (Contact Author)

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Cesar Mantilla

Universidad del Rosario ( email )

Casa Pedro Fermín
Calle 14 # 4-69
Bogota, 110231
Colombia

HOME PAGE: http://www.urosario.edu.co/Profesores/Listado-de-profesores/M/Mantilla-Ribero-Cesar/

Institute for Advanced Study in Toulouse ( email )

31015 Toulouse, Cedex 6
France

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