Risk and uncertainty in health investment

Takao Asano; Akihisa Shibata

doi:10.1007/s10198-010-0238-2

Risk and uncertainty in health investment

Takao Asano, Akihisa Shibata

Research output: Contribution to journal › Article › peer-review

9 Citations (Scopus)

Abstract

Extending the Grossman (J Polit Econ 80:223-255, 1972) model of health capital into a stochastic one, we analyze how the presence of Knightian uncertainty about the efficacy of health care affects the optimal health investment behavior of individuals. Using Gilboa and Schmeidler's (J Math Econ 18:141-153, 1989) model of maxmin expected utility (MMEU) with multiple priors, we show that an agent retains the initial level of health capital if the price of health care lies within a certain range. We also show that the no-investment range expands as the degree of Knightian uncertainty rises.

Original language	English
Pages (from-to)	79-85
Number of pages	7
Journal	European Journal of Health Economics
Volume	12
Issue number	1
DOIs	https://doi.org/10.1007/s10198-010-0238-2
Publication status	Published - Feb 2011
Externally published	Yes

Keywords

Health investment
Risk
Uncertainty

ASJC Scopus subject areas

Economics, Econometrics and Finance (miscellaneous)
Health Policy

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1007/s10198-010-0238-2

Cite this

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AU - Shibata, Akihisa

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N2 - Extending the Grossman (J Polit Econ 80:223-255, 1972) model of health capital into a stochastic one, we analyze how the presence of Knightian uncertainty about the efficacy of health care affects the optimal health investment behavior of individuals. Using Gilboa and Schmeidler's (J Math Econ 18:141-153, 1989) model of maxmin expected utility (MMEU) with multiple priors, we show that an agent retains the initial level of health capital if the price of health care lies within a certain range. We also show that the no-investment range expands as the degree of Knightian uncertainty rises.

AB - Extending the Grossman (J Polit Econ 80:223-255, 1972) model of health capital into a stochastic one, we analyze how the presence of Knightian uncertainty about the efficacy of health care affects the optimal health investment behavior of individuals. Using Gilboa and Schmeidler's (J Math Econ 18:141-153, 1989) model of maxmin expected utility (MMEU) with multiple priors, we show that an agent retains the initial level of health capital if the price of health care lies within a certain range. We also show that the no-investment range expands as the degree of Knightian uncertainty rises.

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KW - Uncertainty

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Risk and uncertainty in health investment

Abstract

Keywords

ASJC Scopus subject areas

UN SDGs

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