Strategies for reducing adverse selection in insurance

Reference no: EM13180928

1. The marginal cost pricing model calculates a markup over marginal costs using estimates of the price elasticity of demand. Will any other pricing strategy result in higher profits?

2. Price discrimination requires the ability to distinguish customers who are the most pricesensitiveand the ability to prevent arbitrage (resale of your products by customers who buy at low prices). What attributes of healthcare products make these tasks easy to do?

3. Describe some healthcare situations in which an agent has taken advantage of a principal.Now describe some healthcare transactions that have not taken place because of fears about asymmetric information.

4. What are some strategies for reducing adverse selection in insurance markets? What sorts of problems do these solutions cause?

Reference no: EM13180928

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