Uncertainty and the demand for medical care.

This paper provides an analysis of the effects of uncertainty on the demand for medical care using a simplified version of Grossman's human capital model of the demand for health. Two types of uncertainty are analysed: the uncertainty surrounding the incidence of illness and the uncertainty surrounding the effectiveness of medical care. In the first the consumer's basic level of health is assumed to be a random variable; in the second the effectiveness of medical care is assumed to be random. Comparative static results are reported indicating the effects on the demand for medical care of both increases in the means of these distributions and mean-preserving spreads of the distributions.