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Schwardmann, Peter (2019): Motivated health risk denial and preventative health care investments. In: Journal of Health Economics, Bd. 65: S. 78-92

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Abstract

People deny health risks, invest too little in disease prevention, and are highly sensitive to the price of preventative health care, especially in developing countries. Moreover, private sector R&D spending on developing-country diseases is almost non-existent. To explain these empirical observations, I propose a model of motivated belief formation, in which an agent's decision to engage in health risk denial balances the psychological benefits of reduced anxiety with the physical cost of underprevention. I use the model to study firms' price-setting behavior and incentive to innovate. I also show that tax-funded prevention subsidies are welfare enhancing. (C) 2019 Elsevier B.V. All rights reserved.

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