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The Optimal Provision of Curative Goods

Authors


  • Ana Pinto Borges, University of Vigo. Dominique Henriet, Ecole Centrale Marseille, GREQAM-IDEP. Didier Laussel, Aix-Marseille Univeristé, GREQAM (didier.laussel@univmed.fr).

Abstract

We analyze the optimal contract between a risk neutral regulator providing a curative goods and a risk averse patient who learns the realized value of his/her health status after the contracting stage. Consumption of a curative good (healthcare) reduces the disutility associated with a disease. We show that the consumption of curative goods is larger than in the complete information case, that this overprovision increases with the degree of patients’ risk-aversion and the marginal cost of treatment. Ceilings on the amount of healthcare are part of the optimal contract when risk aversion is important.

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