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Health Values, Preference Inconsistency, and Insurance Demand

28 Pages Posted: 18 Jan 2006  

Matthias Wrede

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - Institute of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: December 2005

Abstract

Several empirical studies provide evidence that their actual health state affects people's attitudes towards health and medical care in hypothetical health states. In the tradition of behavioural economics this paper considers the actual health state as a point of reference and builds a model for studying the implications of this phenomenon on health insurance and on demand for medical care. It considers the insurance demand of different types of agents: naive individuals, individuals who are able to commit to medical care demand and sophisticated individuals. Furthermore, it raises the question of whether inconsistency of preferences reinforces or tones down moral hazard problems.

Keywords: health insurance, medical care, health state, behavioural economics, prospect theory, time inconsistency

JEL Classification: I11, G22, D82, D91

Suggested Citation

Wrede, Matthias, Health Values, Preference Inconsistency, and Insurance Demand (December 2005). CESifo Working Paper Series No. 1634. Available at SSRN: https://ssrn.com/abstract=876553

Matthias Wrede (Contact Author)

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - Institute of Economics ( email )

Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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