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Genetic Tests and Intertemporal Screening in Competitive Insurance Markets

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  • Winand Emons

Abstract

We consider successive generations of non-altruistic individuals carrying a good or bad gene. Daughters are more likely to carry their mother's gene than the opposite one. Competitive insurers can perform a genetic test revealing an agent's gene. They may condition their quotes on the agent's or on her ancestors' genetic status. In equilibrium generation one is bribed to take the test with an unconditional quote. The insurer uses this information to profitably screen a finite number of generations of their offspring. The offspring of good gene carriers subsidize the tested generation

Suggested Citation

  • Winand Emons, 2006. "Genetic Tests and Intertemporal Screening in Competitive Insurance Markets," Diskussionsschriften dp0605, Universitaet Bern, Departement Volkswirtschaft.
    • Handle: RePEc:ube:dpvwib:dp0605
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    References listed on IDEAS

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    1. Tabarrok, Alexander, 1994. "Genetic testing: An economic and contractarian analysis," Journal of Health Economics, Elsevier, vol. 13(1), pages 75-91, March.
    2. Hoel, Michael & Iversen, Tor & Nilssen, Tore & Vislie, Jon, 2006. "Genetic testing in competitive insurance markets with repulsion from chance: A welfare analysis," Journal of Health Economics, Elsevier, vol. 25(5), pages 847-860, September.
    3. Strohmenger, R. & Wambach, A., 2000. "Adverse selection and categorical discrimination in the health insurance markets: the effects of genetic tests," Journal of Health Economics, Elsevier, vol. 19(2), pages 197-218, March.
    4. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(4), pages 629-649.
    5. Hoel, Michael & Iversen, Tor, 2002. "Genetic testing when there is a mix of compulsory and voluntary health insurance," Journal of Health Economics, Elsevier, vol. 21(2), pages 253-270, March.
    6. Fredrik Andersson, 2001. "Adverse selection and bilateral asymmetric information," Journal of Economics, Springer, vol. 74(2), pages 173-195, June.
    7. Michael Hoy, 1982. "Categorizing Risks in the Insurance Industry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 97(2), pages 321-336.
    8. Michael Hoy & Fabienne Orsi & François Eisinger & Jean Paul Moatti, 2003. "The Impact of Genetic Testing on Healthcare Insurance," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 28(2), pages 203-221, April.
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    Cited by:

    1. Nævdal, Eric, 2014. "Optimal screening for genetic diseases," Economics & Human Biology, Elsevier, vol. 15(C), pages 129-139.

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    More about this item

    Keywords

    genetic tests; insurance; screening; pooling;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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