Asymmetric Information and Health Insurance


This week’s assignment is about asymmetric information, specifically asymmetric information in the healthcare industry.   Related topics are adverse selection and moral hazard.  These terms are related but each as a particular meaning, so it is important to keep your definitions straight (in all honesty, I find these easy to trip over myself).   You must use the proper definitions as we understand these in Managerial Economics.  (Hint: “moral hazard” is not the same as “moral issue.”)

Prior to beginning work on this assignment, it is essential that you read Cardon and Hendel’s article, Asymmetric Information in Health Insurance: Evidence from the National Medical Expenditure Survey(Links to an external site.).This is a lengthy and dense article so you want to start reading now!

My recommendation is to outline your essay to the assignment description and rubric, employing my Writing Tips from Week #2.  Why?  Because this will minimize your effort and maximize your success!  Your sections (identified with skillful paragraph transitions and not with headings) would be:

  1. Evaluate the causes of asymmetric information in the healthcare industry.
  2. Analyze potential adverse selection and moral hazard problems in the healthcare industry.
  3. How can health insurance providers reduce or resolve the adverse selection and moral hazard problems?

As always, be sure to answer each part of the assignment.  Your answers (which will be the topic sentences of the paragraphs of your essay if you are following my Writing Tip #2) will of course be supported by logical argument and the other sentences of your paragraphs.  It is good practice to employ at least one citation from an academic source in support of each of your arguments (in support of each of your topic sentences and in support of your response to each part of the assignment). 

  • Must be three to five double-spaced pages in length (not including title and references pages) and formatted according to APA style (Links to an external site.) as outlined in the Ashford Writing Center (Links to an external site.).
  • Must include a separate title page with the following:
    • Title of paper
    • Student’s name
    • Course name and number
    • Instructor’s name
    • Date submitted
  • Must use at least three scholarly sources in addition to the course text.
  • Must document all sources in APA style as outlined in the Ashford Writing Center.
  • Must include a separate references page that is formatted according to APA style as outlined in the Ashford Writing Center.

Carefully review the Grading Rubric (Links to an external site.) for the criteria that will be used to evaluate your assignment.