ISSN:
1554-9658
Keywords:
asymmetric information
;
insurance markets
;
value of information
;
multidimensional signaling
;
informed principal
Source:
Springer Online Journal Archives 1860-2000
Topics:
Economics
Notes:
Abstract This article models a situation in which a monopolistic insurer evaluates risk better than its customers. The resulting equilibrium allocations are compared to the consequences of the standard adverse selection hypothesis. On the positive side, they exhibit the property that low-risk people are better covered than higher-risk people. On the normative side, the article shows that there are two reasons for avoiding excessive risk classification: one is the classical destruction of insurance possibilities, and the other comes from the distrustful atmosphere generated by new asymmetric information.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1023/A:1008749524517
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