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Optimal choice of prevention and cure under uncertainty on disease effect and cure effectiveness

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  • Brianti, Marco
  • Magnani, Marco
  • Menegatti, Mario
Abstract
This paper studies optimal prevention and cure when an agent copes with two different sources of uncertainty: uncertainty on disease effect and uncertainty on cure effectiveness. We first analyze how optimal choices are affected by uncertainty when prevention and cure do not interact. Under both types of uncertainty, we obtain that the optimal level of prevention rises. Furthermore, we characterize for each source of uncertainty the conditions for the optimal level of cure to increase. We show that these conditions are related to different measures of prudence in health and cross-prudence in wealth. Lastly, we generalize our results to the case where prevention and cure interact and characterize for each source of uncertainty the conditions for the optimal level of prevention and cure to jointly increase. These conditions are similar to those obtained in the case without uncertainty but, in this context, Edgeworth–Pareto complementarity is also required.

Suggested Citation

  • Brianti, Marco & Magnani, Marco & Menegatti, Mario, 2018. "Optimal choice of prevention and cure under uncertainty on disease effect and cure effectiveness," Research in Economics, Elsevier, vol. 72(2), pages 327-342.
    • Handle: RePEc:eee:reecon:v:72:y:2018:i:2:p:327-342
    DOI: 10.1016/j.rie.2017.03.005
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    Cited by:

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    2. Pablo GARCIA SANCHEZ & Luca MARCHIORI & Olivier PIERRARD, 2024. "On Optimal Subsidies for Prevention and Long-Term Care," LIDAM Discussion Papers IRES 2024008, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    3. Emmanuelle Augeraud-Véron & Marc Leandri, 2023. "Optimal self-protection and health risk perception: bridging the gap between risk theory and the Health Belief Model," EconomiX Working Papers 2023-12, University of Paris Nanterre, EconomiX.
    4. Emmanuelle Augeraud‐Véron & Marc Leandri, 2024. "Optimal self‐protection and health risk perceptions: Exploring connections between risk theory and the Health Belief Model," Health Economics, John Wiley & Sons, Ltd., vol. 33(7), pages 1565-1583, July.
    5. Marco Magnani, 2020. "Precautionary retirement and precautionary saving," Journal of Economics, Springer, vol. 129(1), pages 49-77, January.
    6. Pablo Garcia Sanchez & Luca Marchiori & Olivier Pierrard, 2024. "Healthy aging and capital accumulation," BCL working papers 189, Central Bank of Luxembourg.
    7. David Crainich & Louis Eeckhoudt & Mario Menegatti, 2019. "Vaccination as a trade-off between risks," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 5(3), pages 455-472, October.
    8. Desu Liu & Mario Menegatti, 2019. "Optimal saving and health prevention," Journal of Economics, Springer, vol. 128(2), pages 177-191, October.
    9. Tao Yuqing & Mei Jie & Cheng Wen & Zou Sijie, 2019. "Precautionary Effort Investment under Cross Risk Aversion," Journal of Systems Science and Information, De Gruyter, vol. 7(4), pages 344-358, August.
    10. Kit Pong Wong, 2019. "An interpretation of the condition for precautionary saving: the case of greater higher-order interest rate risk," Journal of Economics, Springer, vol. 126(3), pages 275-286, April.

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