[DOWNLOAD] "Illustrating Adverse Selection in Health Insurance Markets with a Classroom Game (Targeting Teaching)" by Southern Economic Journal * Book PDF Kindle ePub Free
eBook details
- Title: Illustrating Adverse Selection in Health Insurance Markets with a Classroom Game (Targeting Teaching)
- Author : Southern Economic Journal
- Release Date : January 01, 2005
- Genre: Business & Personal Finance,Books,
- Pages : * pages
- Size : 304 KB
Description
1. Introduction Theoretical lessons about common insurance market failures can be made accessible to students through the use of case studies, legislative proposals, and other evidence from the "real world." In this paper, I describe a classroom demonstration of a health insurance market in which asymmetric information leads to adverse selection under different insurance regulatory regimes. The basic setup builds on the exercise used by Holt and Sherman (1999) to illustrate how asymmetric information about product quality can lead to adverse selection in the goods market. The first part of this game simulates a market in which low- and high-risk buyers can purchase insurance policies from sellers; in some periods, government-mandated community rating prevents sellers from using information about buyer type to determine premiums. The results demonstrate several textbook predictions regarding the effect of asymmetric information on insurance markets, namely, that it can lead low-risk buyers to drop out of the market and that it can reduce consumer welfare.
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