ABSTRACT
This chapter discusses the most important deviation found in health markets and some other markets, from the standard set of assumptions of the demand model. Consumer sovereignty is challenged by the widespread idea that consumers should be left to suffer the consequences of poor investment decisions in health, and should be required to make provision for likely health service needs. Doctors may order multiple diagnostic tests with low likelihood of important findings, or operate now when a ‘wait and see’ policy has a low risk of exacerbating the problem. The right decisions are difficult to identify, but it is clear that if economic incentives intervene, best guesses, consideration of the risk–intervention trade-off the patient prefers, and trading off risk, effectiveness and cost are not the only considerations in the decision-making process.
