Competition Policy in Selection Markets

Imperfect Competition in Selection Markets∗

Standard policies to correct market power and selection can be misguided when these two forces co-exist. Using a calibrated model of employer-sponsored health insurance, we show that the risk adjustment commonly used by employers to offset adverse selection often reduces the amount of high-quality coverage and thus social surplus. Conversely, in a model of subprime auto lending calibrated to Ei...

Competition policy: The challenge of digital markets

E¢ ciency of Competition in Insurance Markets with Adverse Selection

There is a general presumption that competition is a good thing. In this paper we show that competition in the insurance markets can be bad when there is adverse selection. Using the dual theory of choice under risk, we are able to fully characterize both the competitive and the monopoly market outcomes. When there are two types of risk, the monopoly dominates competition if and only if competi...

Competition and Adverse Selection in Consumer Credit Markets:

We investigate the relationship between payday lenders, which offer small, short-term consumer loans, and traditional depository institutions using a national survey on the provision and pricing of checking account services. Somewhat surprisingly, we find that payday loan competition leads to higher prices for overdraft credit and bounced check transactions at traditional depositories. In addit...

Making Health Care Markets Work: Competition Policy for Health Care.

Many studies have examined trends toward increasing consolidation of physician practices and hospitals in the US health care system and the negative effects of decreased competition on the quality of patient care and health care costs.1 Since 2010, there have been 561 hospital mergers,2 and nearly half of hospital markets are highly concentrated.3 Independent physician practice has declined; 33...