The Economics of Breakdowns, Checkups, and Cures | Zendy

Curtis R. Taylor | Zendy

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The Economics of Breakdowns, Checkups, and Cures

Author(s) -

Curtis R. Taylor

Publication year - 1995

Publication title -

journal of political economy

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 21.034

H-Index - 186

eISSN - 1537-534X

pISSN - 0022-3808

DOI - 10.1086/261975

Subject(s) - procrastination , health maintenance , actuarial science , health insurance , business , insurance policy , disease , economics , public economics , health care , medicine , psychology , economic growth , psychotherapist , pathology

A market in which the owner of a durable good, X, contracts with an expert for diagnostic and treatment services is studied. Good X may be in one of three states: "health," "disease," or "failure." Only experts can determine whether X is healthy or diseased and perform treatment. The owner cannot tell whether recommended treatment is really needed. This creates an information-based demand for health insurance by risk-neutral consumers. Imperfections in the market for spot insurance may give rise to free diagnostic checks, strategic procrastination, and long-term health maintenance agreements.

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