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Adverse Selection in an Insurance Market with Government-Guaranteed Subsistence Levels

29 Pages Posted: 29 Jun 2004  

Harris Schlesinger

University of Alabama; CESifo (Center for Economic Studies and Ifo Institute)

Bum J. Kim

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: June 2004

Abstract

We consider a competitive insurance market with adverse selection. Unlike the standard models, we assume that individuals receive the benefit of some type of potential government assistance that guarantees them a minimum level of wealth. For example, this assistance might be some type of government-sponsored relief program, or it might simply be some type of limited liability afforded via bankruptcy laws. Government assistance is calculated ex post of any insurance benefits. This alters the individuals' demand for insurance coverage. In turn, this affects equilibria in various insurance models of markets with adverse selection.

Keywords: adverse selection, insurance, government relief

JEL Classification: D82, G22, H29

Suggested Citation

Schlesinger, Harris and Kim, Bum J., Adverse Selection in an Insurance Market with Government-Guaranteed Subsistence Levels (June 2004). CESifo Working Paper Series No. 1217. Available at SSRN: https://ssrn.com/abstract=560263

Harris Schlesinger (Contact Author)

University of Alabama ( email )

P.O. Box 870244
200 Alston Hall, Box 870224
Tuscaloosa, AL 35487
United States
205-348-7858 (Phone)
205-348-0590 (Fax)

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Bum J. Kim

affiliation not provided to SSRN

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