Risk Signaling in the Health Insurance Market
AbstractThis paper analyzes equilibrium health insurance premium dependencies on signaling costs given individual health states, risk types, and risk type attributes. Since precise determination of an individual's premium is costly, insurers can categorize insureds based on relative screening costs. We show for two risk types, the equilibrium premium is either community-rated or risk-rated depending on screening costs. For multiple risk types, both policies may be concurrently available in equilibrium.
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Bibliographic InfoArticle provided by College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan in its journal International Journal of Business and Economics.
Volume (Year): 4 (2005)
Issue (Month): 1 (April)
adverse selection; separating equilibrium; pooling equilibrium; signaling costs;
Find related papers by JEL classification:
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
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- Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
- Crocker, Keith J & Snow, Arthur, 1986. "The Efficiency Effects of Categorical Discrimination in the Insurance Industry," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 321-44, April.
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