Adding uncertainty to the model An individual does not know whether she will become sick,but she knows the probability of sickness is p between o and 1 Probability of sickness is p Probability of staying healthy is 1-p If she gets sick,medical bills and missed work will reduce her income Is=income if she does get sick IH>Is=income if she remains healthy Bhattacharya,Hyde and Tu-HealthEconomicsBhattacharya, Hyde and Tu – Health Economics Adding uncertainty to the model  An individual does not know whether she will become sick, but she knows the probability of sickness is p between 0 and 1  Probability of sickness is p  Probability of staying healthy is 1 - p  If she gets sick, medical bills and missed work will reduce her income  IS = income if she does get sick  IH > IS = income if she remains healthy