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How Diagnostic Tests Affect Prevention: a Cost-Benefit Analysis

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Abstract

The purpose of this paper is to offers insight for evaluating research and development in diagnostic tests. We show that a rational policy maker perfectly informed about health risks may choose to reduce investment in prevention when efficient diagnostic tests become available. We show that prevention and diagnostic tests are substitutes rather than complements. As a result the regular improvements in diagnostic technology that are observed can justify a lower investment on prevention at any given unitary price for this activity. The analysis is a useful tool for the allocation of funding between diagnostic and preventive medicine.

Suggested Citation

  • Luis Eeckhoudt & Christian Gollier & Giovanni Immordino, 2001. "How Diagnostic Tests Affect Prevention: a Cost-Benefit Analysis," CSEF Working Papers 53, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    • Handle: RePEc:sef:csefwp:53
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    File URL: http://www.csef.it/WP/wp53.pdf
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    3. Dionne, Georges & Eeckhoudt, Louis, 1985. "Self-insurance, self-protection and increased risk aversion," Economics Letters, Elsevier, vol. 17(1-2), pages 39-42.
    4. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-648, July-Aug..
    5. Dardanoni, Valentino & Wagstaff, Adam, 1987. "Uncertainty, inequalities in health and the demand for health," Journal of Health Economics, Elsevier, vol. 6(4), pages 283-290, December.
    6. Hirshleifer, J & Riley, John G, 1979. "The Analytics of Uncertainty and Information-An Expository Survey," Journal of Economic Literature, American Economic Association, vol. 17(4), pages 1375-1421, December.
    7. Eeckhoudt, Louis R. & Lebrun, Thérèse C. & Sailly, Jean-Claude L., 1984. "The informative content of diagnostic tests: An economic analysis," Social Science & Medicine, Elsevier, vol. 18(10), pages 873-880, January.
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    Cited by:

    1. Giovanni Immordino, 2003. "Looking for a Guide to Protect the Environment: The Development of the Precautionary Principle," Journal of Economic Surveys, Wiley Blackwell, vol. 17(5), pages 629-644, December.
    2. Stéphane Mechoulan, 2006. "Risky Sexual Behavior, Testing and New HIV Treatments," Working Papers tecipa-239, University of Toronto, Department of Economics.

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    More about this item

    Keywords

    prevention; diagnostic tests;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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