Asymmetric information - insurance markets, Microeconomics

Assignment Help:

Q. Asymmetric Information - Insurance Markets?

In the United States, health insurance is usually provided for employees through contracts between the insurance company and their employer while individuals often search the conditions under which they would privately take out insurance quite unattractive. In how far does this point to an asymmetric information problem between insurance company and individual? Who could take out insurance contracts in a market in which contracting is only required directly between individuals and insurers? What is the basic advantage of a contract with an employer? Give an informal discussion.

Answer: There exists an asymmetric information problem if the insurer will not distinguish between individuals with different risk while the individuals themselves can. When offering a health insurance contract at the fair pooled risk premium, only bad risks can want to take out full cover and the insurance company does not break even. In equilibrium, full cover will only be offered at the fair premium for bad risks. Such contracts are unattractive for individuals who pose a smaller risk for the insurance company.


Related Discussions:- Asymmetric information - insurance markets

Economic theory, How economic theory explain optimum pattern of consumption...

How economic theory explain optimum pattern of consumption for an individual consumer

Policies of educational financing - earmarking, Policies of Educational Fin...

Policies of Educational Financing - Earmarking Earmarking refers to setting aside and using the funds generated by a special cess/tax for the particular purpose for which it i

Describe the income and cross elasticity of demand, Problem: a. With th...

Problem: a. With the help of diagrams, describe how the price and quantity of potatoes will change under the different circumstances: (i) A severe drought affecting its pro

Steps of the basic analytical framework in modern economics, What are the s...

What are the steps of the basic analytical framework in Modern Economics? Framework is very significant to master this fundamental analytical framework, particularly, these fiv

Demand, elasticity of demand

elasticity of demand

Homework, Do not submit more than 1 file in the Canvas submission link. A f...

Do not submit more than 1 file in the Canvas submission link. A few years ago peanut farmers in India experienced a super-bumper crop due to favorable weather conditions. Initially

.theory of supply, explain the concept of producers'' equilibrium

explain the concept of producers'' equilibrium

Derivation of ordinary demand function, Derivation Of Ordinary Demand Funct...

Derivation Of Ordinary Demand Function: Suppose,   and q 1  = (Q 1 1 , Q 2 1 ,..., Q n 1 )T. Let M0 be the money income and p 0 q 0  = M 0  and p 0 q 0 ≥ p 0 q 1 , where p

Evironmental issues and elasticity, looking for information to complete ess...

looking for information to complete essay, info looking for What is elasticity and its calculations for the price of a lap top, that increases by 20% and there is a 40% drop in qua

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd