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A Mean-Variance Portfolio Analysis of the Demand and Supply of a Potentially Infectious Service

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Abstract

A health-risking illegal personal service is transacted when the expected extra satisfaction rate exceeds the ratio of the expected extra cost to the legal service price. Its prevalence decreases with the costs of risk bearing for the providers and clients. Law-enforcement effort lowers (raises) the equilibrium price of the illegal and hazardous service when the ratio of the providers’ and the clients’ degrees of absolute risk aversion is greater (smaller) than the ratio of the law-enforcement elasticities of their cost bearing.

Suggested Citation

  • Levy, Amnon, 2007. "A Mean-Variance Portfolio Analysis of the Demand and Supply of a Potentially Infectious Service," Economics Working Papers wp07-02, School of Economics, University of Wollongong, NSW, Australia.
    • Handle: RePEc:uow:depec1:wp07-02
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    File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/web/uow020251.pdf
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    References listed on IDEAS

    as
    1. Levy, Amnon, 2002. "A lifetime portfolio of risky and risk-free sexual behaviour and the prevalence of AIDS," Journal of Health Economics, Elsevier, vol. 21(6), pages 993-1007, November.
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    More about this item

    Keywords

    Unsafe service; Health risk; Legal risk; Law enforcement;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • I1 - Health, Education, and Welfare - - Health
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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