Scandinavian Working Papers in Economics
UiS Working Papers in Economics and Finance,
University of Stavanger
No 2015/6: Policy-Makers, the International Community and People Living with HIV: The Need for New Commitment Mechanisms
Kjell Hausken () and Mthuli Ncube
Additional contact information
Kjell Hausken: UiS, Postal: University of Stavanger, NO-4036 Stavanger, Norway
Mthuli Ncube: Blavatnik School of Government and University of Oxford
Abstract: In order to determine the optimal allocation of responsibilities in disease interventions, and in designing commitment mechanisms, the paper develops a three-period game comprising policy- makers, the international community providing financial aid, and individuals. A policy-maker chooses, in period 1, a fraction of funds to be allocated to disease prevention, and the remaining fraction is allocated to disease treatment. The policy-maker chooses additional funds provision in period 2 for disease treatment. The international community chooses funding in period 3 for disease treatment. Persons engage in risky versus safe behavior which may or may not cause disease contraction. When the international community funds, the policy-maker free rides by not funding additionally. We determine which factors impact how the policy-maker allocates funding between disease prevention and treatment. If the policy-maker funds substantially, the international community free rides by funding less. We quantify how more allocation of funds by the policy-maker to disease prevention causes lower disease contraction probability and higher probability that a person remains sick or dies, and how the international community’s funding impacts these two probabilities. We derive seven assertions from the properties of the model. The model is also tested against empirical data on Africa. The results show consistency between the theoretical model and empirical estimates.
Keywords: Public Economics; Public Choice; Health Economics; Disease; policy; game; funding; prevention; treatment; resource allocation; free riding; risky behavior.
31 pages, May 11, 2015
Full text files
uis_wps_2015_06_hausken.pdf
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