The economics of moral hazard revisited.

@article{Nyman1999TheEO,
  title={The economics of moral hazard revisited.},
  author={John A. Nyman},
  journal={Journal of health economics},
  year={1999},
  volume={18 6},
  pages={811-24}
}
Pauly's (1968) [Pauly, M., 1968. The economics of moral hazard, Comment, American Economic Review 58, 531-537.] analysis of the welfare loss from insurance assumes that medical care consumption is not determined by income, but recent studies suggest it is. This study argues that (1) Pauly's analysis overstates the welfare loss because it includes the effect of income on consumption, (2) the relevant income effect is derived from income transfer from the healthy to the ill that occur when the… CONTINUE READING

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