Risk and uncertainty in health investment

Takao Asano, Akihisa Shibata

Research output: Contribution to journalArticle

7 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 languageEnglish
Pages (from-to)79-85
Number of pages7
JournalEuropean Journal of Health Economics
Volume12
Issue number1
DOIs
Publication statusPublished - Feb 1 2011
Externally publishedYes

Keywords

  • Health investment
  • Risk
  • Uncertainty

ASJC Scopus subject areas

  • Economics, Econometrics and Finance (miscellaneous)
  • Health Policy

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