1 - Behavioural Incentives and Health

Summary

This chapter provides an introduction to behavioural health economics. Far from attempting to replace what we know about health economics as a discipline, behavioural health economics aims at complementing its foundations by relaxing some of its core assumptions. This implies taking a more ‘realistic depiction’ of individual motivation even though it makes it more complex work beyond simple mathematical formulation. By incorporating what are otherwise anomalies of rational decision-making (defined as purposeful decision-making), health economics can go the extra mile with this extended toolkit which we define as behavioural health economics. Our agent is constrained by the social norms of its place and suffers from status quo bias and endowment effects that introduce bias into making decision and evaluations. ‘Real individuals’ care about others and have social preferences with regard to other people’s well-being, and often suffer from self-control problems, where impulsivity and emotion translate into suffering from a specific form of short sightedness otherwise known as ‘present bias’). These problems are arguably more prominent in the health domain. Market price is not the only relevant variable guiding behaviour in health and health care, where insurance is the most common form of payment, and tangible monetary incentives are often not made salient to influence behaviour.