Pet Insurance and Veterinary Treatment Decisions: A Game-Theoretic Model of the Owner–Veterinarian Relationship in Türkiye

This is the authors' abstract. We don't add key points for this paper.

The economic benefits of pet insurance are generally examined through survey-based empirical studies, while a game-theoretic explanation of how insurance changes treatment decisions remains limited. This study models the clinical decision process between a pet owner and a veterinarian as a static, two-player game within expected utility theory, using an exponential (constant absolute risk aversion, CARA) utility function. The veterinarian’s strategy is {Basic, Comprehensive Treatment}, the owner’s is {Accept, Reject}; severity is a two-state random variable (Mild/Severe). Parameters are calibrated using Turkish market data from the author’s previous study. Findings show that in the uninsured regime, a unique Nash equilibrium (Basic Treatment, Reject) endogenously produces economic treatment-refusal behavior; insurance, by altering the payoff structure, makes available a second, Pareto-superior equilibrium (Comprehensive Treatment, Accept). Sensitivity analyses show comprehensive treatment becomes relatively more attractive as risk aversion increases, but once the co-payment rate exceeds a threshold (~46.3%), insurance loses this effect entirely. Premium level does not affect equilibrium selection, being a sunk cost independent of the treatment decision. These findings indicate that the co-payment rate is a more critical policy variable than premium level in insurance design, and offer a game-theoretic explanation for how pet insurance may affect the veterinarian–owner treatment decision.