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Adverse Selection and Nonlinear Pricing in Competitive Insurance Markets


Abstract I conduct a two-fold study on the relationship between adverse selection and nonlinear pricing in competitive insurance markets. First, I reassess empirical evidence of adverse selection in life insurance with the Health and Retirement Study (HRS) data used by Cawley and Philipson (1999). Specifically, I evaluate the shape of the premium schedule and present indications of quantity premia beyond a certain coverage level. The observed pricing schedule appears like the "backward-S-shaped" curve described by Chade and Schlee (2012); I discuss why this result cannot be entirely explained by fixed costs of underwriting. Second, I critique the arguments against adverse selection in existing literature by modifying the Rothschild and Sti... (more)
Created Date 2017-05
Contributor Mahan, Scott Alexander (Author) / Schlee, Edward (Thesis Director) / Silverman, Daniel (Committee Member) / School of Mathematical and Statistical Sciences / Economics Program in CLAS / Barrett, The Honors College
Subject Competitive Insurance Markets / Adverse Selection / Nonlinear Pricing
Series Academic Year 2016-2017
Type Text
Extent 25 pages
Language English
Copyright
Reuse Permissions All Rights Reserved
Collaborating Institutions Barrett, the Honors College
Additional Formats MODS / OAI Dublin Core / RIS


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