Consider Two Types of Rules That Might Govern an Otherwise

question 5

Essay

Consider two types of rules that might govern an otherwise unregulated health insurance market: (1) Insurance companies can price-discriminate against the sick and old; (2) insurance companies cannot price discriminate against the sick and old.Explain why, in equilibrium, insurance may be very expensive for the sick and old regardless of which case we find ourselves in.

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Definitions:

Win-Lose Approach

A competitive strategy or mindset where success is achieved at the expense of others, focusing on one's own gain without regard for collective outcomes.

Neutrality

The state of not supporting or helping either side in a conflict or disagreement; impartiality.

Passive Person

An individual who tends to accept or allow what happens or what others do without active response or resistance.

Elicit

To draw out a response, answer, or fact from someone in a subtle or skillful manner.