Monday, July 25, 2011

[EQ] Demand and Pricing of Preventative Healthcare

Demand and Pricing of Preventative Healthcare

Sotiris Vandoros1, Katherine Grace Carman2

1 LSE Health, London School of Economics, UK

2 Department of Economics, Center and Netspar, Tilburg University, the Netherlands

Working Paper No. 23/2011

LSE Health - The London School of Economics and Political Science, May 2011

Available online at:

“…….This study introduces a theoretical framework for the economics of preventative healthcare.

Mathematical models are used to explain how the price and utilization of prevention change depending on demand, as well as factors such as the price of a cure, the probability of illness, the efficacy of treatment, the probability of illness and cost functions.
Different models are developed depending on the presence and level of health insurance and competition in preventative healthcare markets.

Findings show the effect of various factors on the price of preventative healthcare, reveal the marginal effects of a change in the parameters on prices and suggest that under certain circumstances prevention is not the optimal choice….”


“…..This paper sets out a simple model to compare prices of preventative care across various regimes. In an environment of rising health costs, prevention is very important as it decreases the likelihood of need to cure illnesses in the future.


However, prevention is not always the best solution, as costs may be too high compared to cure and disutility of illness, taking into account the probability of illness, while depending on the source of demand and the level of insurance cover, quantities of prevention purchased and the number of people covered may differ significantly…..”


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