Journal of Political Economy Vol. 103 No. 1 1995
The Economics of Breakdowns, Checkups, and Cures
open access
Abstract
A market in which the owner of a durable good, X, contracts with an expert for diagnostic and treatment services is studied. Good X may be in one of three states: "health," "disease," or "failure." Only experts can determine whether X is healthy or diseased and perform treatment. The owner cannot tell whether recommended treatment is really needed. This creates an information-based demand for health insurance by risk-neutral consumers. Imperfections in the market for spot insurance may give rise to free diagnostic checks, strategic procrastination, and long-term health maintenance agreements.
- DOI
- 10.1086/261975
- Volume
- 103
- Issue
- 1
- Pages
- 53-74
- Language
- en
- Sources
- openalex crossref