Asymmetric Information with multiple risks: the case of the Chilean Private Health Insurance Market

Dolores de la Mata, Pau Olivella and Maria Nieves Valdés
Authors registered in the RePEc Author Service: Matilde Pinto Machado ()

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: We extend Rothshild and Stiglitz (1976) model to two sources of risk to better proxy real-world health insurance markets. This extension produces an interesting theoretical possibility: Take individuals A and B, who are low risks in one dimension but A is riskier in the other dimension. Then, A may enjoy less coverage than B in the former dimension (coverage reversal). The existence of this reversal determines which individuals are more likely to suffer adverse selection. We adapt Chiappori and Salanié (2000) positive correlation test to account for this multi-dimensionality and apply it to individual-level claims data for the privately insured in Chile.

Keywords: Insurance; Markets; Health; Insurance; Adverse; Selection; Advantageous; Selection; Positive; Correlation; Test; Competitive; Multidimensional; Screening (search for similar items in EconPapers)
JEL-codes: D82 I13 L13 (search for similar items in EconPapers)
Date: 2022-07-12
New Economics Papers: this item is included in nep-com and nep-hea
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:35441

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