This paper analyzes optimal risk adjustment for direct risk selection (DRS). Integrating insurers activities for risk selection into a discrete choice model of individuals’ health insurance choice shows that DRS has the structure of a contest. For the contest success function used in most of...

This paper analyzes the distortions of health insurers’ benefit packages due to adverse selection when there is imperfect competition. Within a discrete choice setting with two risk types, the following main results are derived: For intermediate levels of competition, the benefit packages of...

This paper analyzes the distortions of (health) insurers' benefit levels due to adverse selection if individuals' responsiveness to differences in contracts is heterogeneous. Within a discrete choice model with two risk types and imperfect competition the following results are shown: In the...

This paper analyzes the interaction of direct and indirect risk selection in health insurance markets. It is shown that direct risk selection – using measures unrelated to the benefit package like selective advertising or ‘losing’ applications of high risk individuals – nevertheless has...