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The Optimal Provision of Curative Goods
Author(s) -
BORGES ANA PINTO,
HENRIET DOMINIQUE,
LAUSSEL DIDIER
Publication year - 2011
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/j.1467-9779.2011.01510.x
Subject(s) - consumption (sociology) , marginal utility , risk aversion (psychology) , economics , marginal value , microeconomics , value (mathematics) , marginal cost , actuarial science , expected utility hypothesis , financial economics , computer science , social science , machine learning , sociology
We analyze the optimal contract between a risk neutral regulator providing a curative goods and a risk averse patient who learns the realized value of his/her health status after the contracting stage. Consumption of a curative good (healthcare) reduces the disutility associated with a disease. We show that the consumption of curative goods is larger than in the complete information case, that this overprovision increases with the degree of patients’ risk‐aversion and the marginal cost of treatment. Ceilings on the amount of healthcare are part of the optimal contract when risk aversion is important.