| Demand for Health Care investigates the relationship between life and money. While few individuals would literally trade their lives for money, many act in ways such that their survival probability is either increased or decreased in exchange for financial considerations.;This problem is analyzed for both general risk averse utility and for isoelastic utility. For isoelastic utility, numerical examples are presented in which optimal individual decisions and the corresponding implied value of life are calculated and compared.;Demand for Guaranteed Insurability investigates the demand for this financial security. Guaranteed insurability can be purchased in conjunction with most life insurance policies. It provides a hedge against a changing investment opportunity set, i.e., it hedges against an unexpected increase in the price of life insurance.;The financial model again employs a multiperiod, probabilistic lifetime framework. The individual is assumed to allocate his wealth to consumption, to riskless investment, to term life insurance and to guaranteed insurability.;The financial model employs a multiperiod, probabilistic lifetime framework. The individual is assumed to allocate his wealth to consumption, to risky and riskless investment and to health care. Dynamic programming is employed to solve the individual's optimal wealth allocation problem.;The individual's optimal wealth allocation problem is analyzed for both general risk averse utility and for isoelastic utility. For isoelastic utility, numerical examples are presented in which optimal individual decisions are calculated under various assumptions as to the level of competition in the market for guaranteed insurability and the level of information available to insurers about the health prospects of potential policyholders. The corresponding equilibria are then analyzed in terms of aggregate demand, market price, insurer profitability and the value of information. |
