On the Economics of Rational Self-Medication

It has been established in the medical literature that self-medicating with imperfect information about either the use of a genuine or counterfeit drug or based on wrong self-diagnosis of ailment, which is predominant especially in developing countries, is a risky investment in health capital. This paper models the decision to self-medicate and the demand for self-medicated drugs. We suppose that investment in self-medication depends on the perception of its effectiveness. The results obtained show that the decision to self-medicate depends on the relative price and perceived effectiveness of self-medication, the elasticity of the shadow value of health with respect to the quantity of health capital, and the relative effectiveness of self-medication in reducing the unpredictable changes in health capital. Furthermore, if an individual self-medicates, self-medication becomes a normal good: it increases if income increases; and it obeys the law of demand (i.e. it increases if its price, relative to that of the risk-free medication, decreases). Moreover, we have shown that some optimum subsidy can discourage self-medication.


Issue Date:
2008
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/6363
Total Pages:
23
JEL Codes:
I12; I18; D81; C61
Series Statement:
SIEV Nota de Lavoro
5.2008




 Record created 2017-04-01, last modified 2017-04-04

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