Asymmetric Information and Health Insurance
we added the thoughts of uneven statistics, and destructive selection and we implemented the ones thoughts to the used car marketplace. allow's take the ones identical fundamental standards, and build a basic version of medical health insurance. assume that potential medical health insurance consumers come in various states of health. as an instance, the least healthy people may cost about $30,000 a year. it is those folks here. The most healthful may cost a little not anything in healthcare. it's those oldsters over here. Now purchasers understand this records, however via assumption, insurers don't. >From the insurer factor of view, every person is of the identical average health. here again, we've got uneven data. that is customers of healthcare have greater information approximately their health repute than insurers do. on this situation, insurers need to charge the insurance primarily based on the common fee among all purchasers, particularly, $15,000. but if th...