Roy Seminar (ADRES)

Du 04/04/2022 de 17:00 à 18:15

Salle R2.01 - Campus Jourdan 75014 Paris

CHADE Hector (Arizona State University)

Multidimensional Screening and Menu Design in Health Insurance Markets

We study a general model of a health insurance market with multidimensional consumer heterogeneity and moral hazard. Consumers have private information about their risk aversion, taste for healthcare utilization, and distribution over health states. After choosing an insurance contract and privately observing their health state, they choose how much healthcare to utilize. We consider the menu design problem facing an insurer that can offer vertically differentiated contracts and can set premiums. Our framework permits a flexible insurer objective function, encompassing the problems of both a social planner and monopolist. We show that optimal menus satisfy intuitive optimality conditions that subsume several cases in the literature. Moreover, we show that the problem where the insurer can choose from a continuum of contracts can be well-approximated by the problem with a finite set of contracts. We implement the framework numerically given empirical distributions of consumer risks and preferences. Simulations illustrate the differential incentives of a monopolist and a social planner, and shed light on optimal regulation of a monopoly insurer. We highlight that strategic insurer behavior presents unique challenges not present in perfectly competitive markets.