Figure 1: Expected utility as a function of the size of the co-paymant
As p increases beyond p0, more and more persons choose not to be
treated. The person illustrated by Figure 1 chooses treatment provided the
co-payment does not exceed p1. For p > p1 expected utility is increasing in
p, cf. (7). In Figure 1, v is strictly concave for p ∈ (p0,p1). Generally, this
need not be the case. And even if V is strictly concave for p ∈ (p0,p1) with
a local maximum at p*, it is not obvious which of the three values V (y,£, 0),
V (y,£,p*) and V (y,£,c) is highest.
3 Co-payment and social welfare
The objective of the government is to maximize the sum of welfare for all
persons. However, for a government concerned about equity it is not reason-
able to assume that this sum is unweighted. If the government cares about
equity, it is reasonable to assume that persons with low expected utility have
a higher weight in the sum of welfare than persons with high expected util-
More intriguing information
1. Mean Variance Optimization of Non-Linear Systems and Worst-case Analysis2. Evidence-Based Professional Development of Science Teachers in Two Countries
3. The name is absent
4. MANAGEMENT PRACTICES ON VIRGINIA DAIRY FARMS
5. ARE VOLATILITY EXPECTATIONS CHARACTERIZED BY REGIME SHIFTS? EVIDENCE FROM IMPLIED VOLATILITY INDICES
6. The name is absent
7. Government spending composition, technical change and wage inequality
8. Regulation of the Electricity Industry in Bolivia: Its Impact on Access to the Poor, Prices and Quality
9. Lumpy Investment, Sectoral Propagation, and Business Cycles
10. Accurate and robust image superresolution by neural processing of local image representations