Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Thursday, May 31, 2012

An Econometric Analysis of Insurance Markets with Separate Identification for Moral Hazard and Selection

Posted by D. Daniel Sokol

Shunya Sugawara (Graduate School of Economics, University of Tokyo) and Yasuhiro Omori (Faculty of Economics, University of Tokyo) undertake An Econometric Analysis of Insurance Markets with Separate Identification for Moral Hazard and Selection.

ABSTRACT: This paper proposes a simple econometric framework that can identify moral hazard and selection problems separately in insurance markets. Although our methodology requires behavioral assumptions on the consumer's optimization, we show that these assumptions are necessary for the separate identification of the two sources of information asymmetry. Our method is applied to the dental insurance market in the United States. In addition to standard moral hazard, we find advantageous selection, which is not detected by a conventional methodology.

http://lawprofessors.typepad.com/antitrustprof_blog/2012/05/an-econometric-analysis-of-insurance-markets-with-separate-identification-for-moral-hazard-and-selec.html

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