The Two-Margin Problem in Insurance Markets.

ABSTRACT: Insurance markets often feature consumer sorting along both an extensive margin (whether to buy) and an intensive margin (which plan to buy). We present a new graphical theoretical framework that extends a workhorse model to incorporate both selection margins simultaneously. A key insight from our framework is that policies aimed at addressing one margin of selection often involve an economically meaningful trade-off on the other margin in terms of prices, enrollment, and welfare. Using data from Massachusetts, we illustrate these trade-offs in an empirical sufficient statistics approach that is tightly linked to the graphical framework we develop.

SUBMITTER: Geruso M 

PROVIDER: S-EPMC10181796 | biostudies-literature | 2023 Mar

REPOSITORIES: biostudies-literature