Ind ividual moral hazard engendered by health insurance and monopolistic production are both typical phenomena of drug markets. We develop a simple model containing these two elements and evaluate the market equilibrium on the basis of consumer and social welfare. The consumer welfare criterion...

Standard policies to correct market power and selection can be misguided when these two forces co-exist. Using a calibrated model of employer-sponsored health insurance, we show that the risk adjustment commonly used by employers to offset adverse selection often reduces the amount of...

Policies to correct market power and selection can be misguided when these forces co-exist. We build a model of symmetric imperfect competition in selection markets that parameterizes the degree of market power and selection. We use graphical price-theoretic reasoning to characterize the...

Standard policies to correct market power and selection can be misguided when these two forces co-exist. Using a calibrated model of employer-sponsored health insurance, we show that the risk adjustment commonly used by employers to offset adverse selection often reduces the amount of...

A feature of many insurance markets is that they combine vertical differentiation (all consumers prefer high to low-coverage policies) and adverse selection (high cost customers prefer high-coverage plans). Building on Novshek and Sonnenschein (1978) and Azevedo and Gottlieb (2017), this paper...