Multidimensional Screening for Quality with an Application to Health Insurance

Hector Chade, Victoria Marone, Amanda Starc and Jeroen Swinkels
Additional contact information
Hector Chade: Arizona State University
Victoria Marone: Yale University
Amanda Starc: Northwestern University
Jeroen Swinkels: Northwestern University

No 2541, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We analyze a multidimensional screening model in which a principal offers a menu of quality-price pairs to a consumer with multiple dimensions of private information and a quasilinear utility function. We derive necessary conditions for optimality, and use them to provide insight into optimal exclusion, positive trade, and screening. We then recast the problem in terms of incremental quality levels and prices, the so-called demand-profile approach (DPA). Under DPA, the problem decouples across increments and can be solved one at a time. We provide novel conditions under which DPA recovers the solution to the full problem exactly or approximately, and which make the necessary conditions sufficient for optimality: essentially, valuations must be sufficiently correlated across quality increments. Applied to empirical estimates of demand for health insurance, we show that DPA is approximately valid, and we apply it to understand equilibrium outcomes in a monopoly insurance market.

Pages: 91 pages
Date: 2026-06-30
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cowles.yale.edu/sites/default/files/2026-07/d2541_1.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cwl:cwldpp:2541

Ordering information: This working paper can be ordered from
Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
The price is None.

Access Statistics for this paper

More papers in Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University Yale University, Box 208281, New Haven, CT 06520-8281 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Brittany Ladd ().