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The Economics of Breakdowns, Checkups, and Cures
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The Economics of Breakdowns, Checkups, and Cures

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  • Taylor, Curtis R

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. Copyright 1995 by University of Chicago Press.

Suggested Citation

  • Taylor, Curtis R, 1995. "The Economics of Breakdowns, Checkups, and Cures," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 53-74, February.
    • Handle: RePEc:ucp:jpolec:v:103:y:1995:i:1:p:53-74
    DOI: 10.1086/261975
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