This paper analyzes the impact of biased beliefs on the structure of informational equilibria in classical self-selection models. While the assessment of an individual's type is biased, they still possess relevant "residual private information." Using the insurance market example of...

We study how inertia interacts with market power and adverse selection in managed competition health insurance markets. We use consumer-level data to estimate a model of the California ACA exchange, in which four firms dominate the market and risk adjustment is in place to manage selection. We...

Risk adjustment is used in settings with uncertainty to make payments or allow comparisons of outcomes while controlling for exogenous risk factors that explain variations in the outcome of interest, such as spending, utilisation, quality or death. This article focuses on the conceptual and...

In Chile, dependant workers are mandated to purchase health insurance and they can chose between one public provider and several private providers. Here, we analyze the relation between utilization and the choice of either private or public insurance. Independent workers, however, are not...

Risk classification refers to the use of observable characteristics by insurers to group individuals with similar expected claims, compute the corresponding premiums, and thereby reduce asymmetric information. An efficient risk classification system generates premiums that fully reflect the...

Competition between insurance companies for employees of a firm often increases the prices and reduces the availability of high-quality health plans offered to employees. An insurance company can reduce competition by signing an exclusive contract, which guarantees that the company is the only...

We investigate the presence of moral hazard and advantageous or adverse selection in a market for supplementary health insurance. For this we specify and estimate dynamic models for health insurance decisions and health care utilization. Estimates of the health care utilization models indicate...

Micro data from a dental insurance natural experiment is used to analyze why agents opt out of insurance. The purpose is to relate the dropout decision to new information on risk, acquired by the policy holder and the insurer. The results show that agents tend to leave the insurance when...

The empirical evidence of adverse selection in insurance markets is mixed. The problem in assessing the extent of adverse selection is that private information, on which agents act, is generally unobservable to the researcher, which makes it difficult to distinguish between adverse selection and...

Adverse selection, which is well described in the theoretical literature on insurance, remains relatively difficult to study empirically. The traditional approach, which focuses on the binary decision of “covered” or “not”, potentially misses the main effects because heterogeneity may be...