Economic Analysis of Risk and Uncertainty Induced by Health Shocks: A Review and Extension
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of individual applicants. This suggests that the observed selection effects may owe more
to the institutional arrangements in the market rather than the technical ability of the
insurer to gather information. Indeed, Cardon and Hendel (2001) argue that much of
the claims variation in health insurance can be explained by observable characteristics,
and private information about health status seems to play only a small role.
In other circumstances, asymmetric information between consumers and insurers
may be present, but adverse selection—in the sense that ...
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