The Economics of Breakdowns, Checkups, and Cures
Abstract
A market in which the owner of a durable good, X, contracts with an expert for diagnostic
and treatment services is studied. Good X may be in one of three states: health, disease,
or failure. Only experts can determine whether X is healthy or diseased and perform
treatment. The owner cannot tell whether recommended treatment is really needed. This
creates an information-based demand for health insurance by risk-neutral consumers.
Imperfections in the market for spot insurance may give rise to free diagnostic checks,
strategic procrastination, and long-term health maintenance agreements. Copyright
1995 by University of Chicago Press.
Type
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https://hdl.handle.net/10161/1989Collections
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Curtis R. Taylor
Professor of Economics
Taylor's primary research interest is microeconomic theory with emphasis on the areas
of Industrial Organization, Political Economy, and the Theory of Contracts. He has
worked on a variety of topics such as: the optimal design of research contests, the
causes and timing of market crashes, and consumer privacy. Professor Taylor's research
has been supported by grants from the National
Science Foundation, the U.S. Department of Agriculture, and the Texas Higher Education
Coordinating Board, am
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