This paper analyzes the effects of additional information in a life insurance market under adverse selection. It is shown that individuals have an ncentive to acquire information about their risk type if their informational status cannot be observed by insurers. In aggregate, the existence of a testing opportunity has an effect on the equilibrium premium. We describe the conditions under which, from an ex ante standpoint, all individuals gain, all lose or in which some gain and some lose from the existence of the test.
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Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number
CESifo Working Paper No. 165.
Find related papers by JEL classification: D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
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Hoel, Michael & Iversen, Tor & Nilssen, Tore & Vislie, Jon, 2003.
"Genetic testing and repulsion from chance,"
Memorandum
20/2003, Oslo University, Department of Economics.
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