Microeconomics · free preview
Screening
The uninformed side designs a menu of contracts so each type picks its own row, deductibles separate the healthy from the sick, and the menu's shape is the discovery mechanism.
1. The menu is the machine
The menu is the machine
2. The arithmetic of deductibles
The arithmetic of deductibles
3. Screening in the wild
Screening in the wild
4. Tying and the limits of screens
Tying and the limits of screens
5. How the menu works
An insurer offers a cheap premium with a large deductible and an expensive premium with full coverage. Why do these two rows separate healthy from sick clients?
6. The screen's cost
Why does screening-based insurance leave some risk uninsured by design?
7. The deductible's burden
A client expects 20 thousand of claims. A contract charges a 5 premium with a 12 deductible, so the insurer pays claims above the 12. Compute the client's expected net gain from this contract in thousands, the expected payout minus the premium, and write the number.
8. The menu's mechanics
An insurer offers a cheap premium with a large deductible and an expensive premium with full coverage. How does this menu screen?
9. The uninsured residue
Why does screening-based insurance leave some risk uninsured by design?
10. The screen's payout
A client expects 15 thousand of claims, a contract charges a 4 premium with a 10 deductible, so the insurer pays claims above 10. Compute the insurer's expected profit in thousands, and write the number.
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