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Individual Mandates in Insurance Markets with Asymmetrical Information

Hedblom, Daniel (2008)
Department of Economics
Abstract
A Rothschild & Stiglitz (1976) model of a market for insurance is used in order to discuss how asymmetrical information can lead to a decrease in coverage in the market. A simple model of how an individual mandate that requires all individuals in a population to obtain insurance affects the market equilibrium is proposed. I show how such a mandate can give implications for the existence of a equilibrium, through a shift in the average risk in the population. The theoretical effect depends on the combinations of income and risk in the market, and is therefore inconclusive. Finally the Massachusetts health care reform is used as an example of how the models may be applied.
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@misc{1336946,
  abstract     = {A Rothschild & Stiglitz (1976) model of a market for insurance is used in order to discuss how asymmetrical information can lead to a decrease in coverage in the market. A simple model of how an individual mandate that requires all individuals in a population to obtain insurance affects the market equilibrium is proposed. I show how such a mandate can give implications for the existence of a equilibrium, through a shift in the average risk in the population. The theoretical effect depends on the combinations of income and risk in the market, and is therefore inconclusive. Finally the Massachusetts health care reform is used as an example of how the models may be applied.},
  author       = {Hedblom, Daniel},
  keyword      = {reform,Insurance,adverse selection,Asymmetrical Information,Individual Mandate,Massachusetts,Economics, econometrics, economic theory, economic systems, economic policy,Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik},
  language     = {eng},
  note         = {Student Paper},
  title        = {Individual Mandates in Insurance Markets with Asymmetrical Information},
  year         = {2008},
}