Moral hazard, optimal healthcare-seeking behavior, and competitive equilibrium.

Malakhov, Sergey (2017): Moral hazard, optimal healthcare-seeking behavior, and competitive equilibrium.

Abstract

The theory of the optimal-consumption leisure choice under price dispersion describes the phenomenon of moral hazard as the customer’s reaction on unfair insurance policy. The unfair insurance offer does not equalize marginal costs of propensity to seek healthcare with marginal benefits on purchase. Under unfair insurance policy consumers increase ex post healthcare seeking activities and they optimize their consumption of medical services. The analysis of moral hazard results in the assumption that for an unfair offer there is an increase in the time horizon of the insurance policy that makes it fair and moral hazard becomes inefficient. The time horizon competition between insurance companies can eliminate moral hazard effect that clears the way to the competitive equilibrium.

• Item Type: MPRA Paper
• Language: English
• Keywords: moral hazard, health insurance, healthcare seeking behavior, optimal consumption-leisure choice
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness; I - Health, Education, and Welfare > I1 - Health > I13 - Health Insurance, Public and Private

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