Talk:Adverse selection

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From Health insurance:

Some states require that insurance companies cover all who apply at the same cost

Here adverse selection occurs without asymmetry of information. So, is asymmetry of information really key to adverse selection? CyborgTosser 21:37, 12 Jun 2004 (UTC)

Contents 1 Discrepancy between this and The Market for Lemons 2 Definition of adverse selection is overly broad: it does not include moral hazard 3 "(Whatever)" 4 Smoker / non-smoker example

[edit] Discrepancy between this and The Market for Lemons

This article describes the good cars as being dubbed "cherries", while The Market for Lemons describes them as being dubbed "jewels". I suspect one is wrong. Anyone know which? —Morven 06:19, Jul 28, 2004 (UTC)

I'm pretty sure that "cherries" is the term that Akerlof used (I don't have the article here). Other sources refer to "peaches." By the way, the adverse-selection process is also sometimes refered to as "cream skimming." Jdevine 17:11, 28 Jul 2004 (UTC)

[edit] Definition of adverse selection is overly broad: it does not include moral hazard

The definition is wrong. Adverse selection refers to assymetric information prior or to or during the negotiation of the deal, whereas moral hazard refers to assymetric information during performance of the resulting contract. An example of moral hazard is that people are are more likely to behave recklessly if insured. An example of adverse selection is that people who are high risk are more likely to buy insurance. They are quite distinct concepts. They are both examples of assymetric information which I've created a new stub for. Economo 05:06, 18 August 2006 (UTC)

[edit] "(Whatever)"

Under the "Example:Insurance" sub-heading, is there some reason for the "(Whatever)", or is this a mischievous bit of editing? Sharodes 17:05, 27 August 2007 (UTC)

[edit] Smoker / non-smoker example

Smokers have a higher expected medical costs so they would be willing to spend more on insurance than non-smokers. In each 'round' the premium should move away from the general population actuarially fair cost because the increased premiums become too much for the non-smoker. However, why would the premiums ever become greater than the smoker actuarially fair cost? So in the end only smokers would chose to purchase insurance, but some people would still get insurance. —Preceding unsigned comment added by 68.231.165.44 (talk) 18:47, 22 March 2008 (UTC)