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We examine the impacts of age, income and insurance plan on behavior in a virtual environment with cash-motivated subjects, who live multi-period lives in which they earn income and spend on enjoyment, insurance, and investments in health. Health shocks increase simulating aging. The 2x2 experimental has high and low income subjects, and offers employer-based or actuarial insurance. We find: 1) subject behavior approximated optimal responses; 2) in all treatments, subjects under-invested in health early in life and over-invested in health late in life; 3) subjects in the employer-based plan purchased insurance at higher rates; 4) the employer-based plan reduced differences due to income and age; 5) subjects in the actuarial plan engaged in more health-promoting behaviors, but still below optimal levels, and did save at the level required, so did realize the full benefits of the plan. Should these results generalize, they have clear implications for the health insurance policy.


Working Paper 19-16



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