| This thesis presents an alternative approach to solve for the optimal health investment and consumer choice in a neo-classical framework. We find an optimal solution that is almost always unique in the presence of non-convexity and possible corner solutions, without assuming for a specific utility function. The model results show that if income is lower than a certain threshold, it is optimal for consumers not to invest in health care. As income decreases, there is another threshold below which it is optimal for consumers to spend all income on consumption goods and have zero saving and health care. Comparative static further shows that consumers of different income class respond differently to changes in income, public health investment, and government provided retirement benefits. Strategic consideration introduced into the study implies that the lack of affordable health care in a nation may result from not only the existence of poverty, but also coordination failure among consumers. |
