If only risk-averse people will buy health insurance, why do many people who buy health insurance also
Question:
If only risk-averse people will buy health insurance, why do many people who buy health insurance also buy lottery tickets (an activity more consistent with risk-taking, especially since most lotteries are not actuarially fair)? Speculate on the differences and similarities.
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This is an interesting question that connects two seemingly opposing behaviors risk aversion buying insurance and risktaking purchasing lottery tickets In order to understand this lets break down each concept individually and then discuss how an individual might engage in both activities 1 Purchasing health insurance This is generally considered a riskaverse behavior When someone buys insurance theyre effectively paying a small and certain cost to avoid the possibility of a large uncertain loss In this case the loss would be the high cost associated with serious illness or accidents Purchasing insurance therefore is a tactic used to manage and minimize risk 2 Buying lottery tickets This activity is typically associated with riskseeking behavior A person buys a lottery ticket ...View the full answer
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Marcus Solomon
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Related Book For 
The Economics Of Health And Health Care
ISBN: 9781138208049
8th Edition
Authors: Sherman Folland, Allen C. Goodman, Miron Stano
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