Suppose there is a set of patients whose expected costs are uniformly distributed between $2000 and $7000and each of these patients is willing to pay up to $1000 above their expected costs for the insurance.The insurance market is perfectly competitive and the price of insurance will be equal to the average cost of consumers who purchase the insurance. The insurance company do not observe costs from individual consumers.
a What is the price of insurance in the equilibrium?
b Who buy insurance in equilibrium?
Now, suppose the insurance company can tell if an individual patient’s cost is above or below $5000 and can provide two different insurance plans for these two groups of patients (those with costs above $5000 and those with costs below $5000).
c What is the price of the insurance for low-cost patients?
d What is the price of the insurance for high-cost patients?
e Who benefit from the provision of two different types of insurance and who suffer? Why
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more