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

Schlesinger, Harris; Kim, Bum J.

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

29 Pages Posted: 29 Jun 2004

See all articles by Harris Schlesinger

Harris Schlesinger

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

Bum J. Kim

affiliation not provided to SSRN

There 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: Suggested Citation

Schlesinger, Harris and Kim, Bum J., Adverse Selection in an Insurance Market with Government-Guaranteed Subsistence Levels (June 2004). Available at SSRN: https://ssrn.com/abstract=560263