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The Dynamics of Health Care Demand During an Illness Episode

By David Benson

Previous studies assume consumers make medical care choices over large (e.g. yearly) time steps. However, most health expenses occur in the weeks immediately following a shock to health. It is unknown whether demand during an illness episode diers from normal long-run demand. How do consumers make the sequential, dynamic choices to consume medical care during an episode of severe illness? A theory of the consumer’s short-run health investment is oered and tested empirically using the Medical Expenditure Panel Survey. It is found that demand is extremely price inelastic immediately following the shock, but is very responsive to changes in health.

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Advisor: Frank Sloan

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