The Two-Margin Problem in Insurance Markets

Michael Geruso, Timothy Layton, Grace McCormack and Mark Shepard
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Michael Geruso: University of Texas at Austin and NBER
Grace McCormack: Harvard University
Mark Shepard: Harvard University and NBER

The Review of Economics and Statistics, 2023, vol. 105, issue 2, 237-257

Abstract: Insurance markets often feature consumer sorting along both an extensive margin (whether to buy) and an intensive margin (which plan to buy). We present a new graphical theoretical framework that extends a workhorse model to incorporate both selection margins simultaneously. A key insight from our framework is that policies aimed at addressing one margin of selection often involve an economically meaningful trade-off on the other margin in terms of prices, enrollment, and welfare. Using data from Massachusetts, we illustrate these trade-offs in an empirical sufficient statistics approach that is tightly linked to the graphical framework we develop.

Date: 2023
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Citations: View citations in EconPapers (5)

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https://doi.org/10.1162/rest_a_01070

Related works:
Working Paper: The Two Margin Problem in Insurance Markets (2019)
Working Paper: The Two Margin Problem in Insurance Markets (2019)
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