Imperfect Competition in Selection Markets

• 成果类型: Article
• 署名作者: Mahoney, Neale; Weyl, E. Glen
• 署名单位: University of Chicago; National Bureau of Economic Research
• 刊物名称: REVIEW OF ECONOMICS AND STATISTICS
• ISSN/ISSBN: 0034-6535
• DOI: 10.1162/REST_a_00661
• 发表日期: 2017-10
• 页码: 637-651
• 关键词: Adverse selection; insurance markets; health-insurance; asymmetric information; consumer welfare; risk adjustment; plan choice; cost; industry

摘要

Policies to correct market power and selection can be misguided when these forces coexist. We build a model of symmetric imperfect competition in selection markets that parameterizes the degree of market power and selection. We use graphical price-theoretic reasoning to characterize the interaction between these forces. Using a calibrated model of health insurance, we show that the risk adjustment commonly used to offset adverse selection can reduce coverage and social surplus. Conversely, in a calibrated model of subprime auto lending, realistic levels of competition can generate an oversupply of credit, implying that greater market power is desirable.