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New Yale Scholarship: Not so risky after all?
Posted by Lea Bishop on Monday, May 10 @ 15:52:25 EDT Scholarship
Peter Siegelman, Adverse Selection in Insurance Markets: An Exaggerated Threat, 113 YALE L.J. 1223 (2004).

The theory of adverse selection in insurance markets predicts that individuals can use private information about their own risk to purchase insurance below its true value, by declining to purchase when their individual risk is less than or equal to assessed risk, and purchasing insurance when their risk is in fact high, due to factors the insurance market is unable to measure. Although economists, policy-makers, legal scholars, and courts routinely discuss the danger that this behavior may dramatically distort the insurance market and raise costs for all, this Essay argues that, while theoretically possible, adverse selection is not nearly so serious a threat in practice as has been supposed by the dominant economic models.
 
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