Motivated health risk denial and preventative health care investments

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

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.

• Item Type: Journal article
• Faculties: Economics
• Subjects: 300 Social sciences > 330 Economics
• ISSN: 0167-6296
• Language: English