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Unformatted text preview: PADP 6950: Founda1ons of Policy Analysis Asymmetric Informa0on PRACTICE Angela Fer1g, PhD Health Insurance Game 1. Divide into 6 seller groups; Read instruc1ons 2. Sellers choose premiums for T1 policy and T2 (sicker) policy 3. Post premiums on board 4. I will choose 6 cards at random telling me the types of buyers this round 5. I will act as the buyers and choose policies to buy, or choose not to buy 6. Rule: Each seller can only sell 2 policies total 7. Record results on sheet and on board 8. Repeat 3 more 1mes 1 Asymmetric Informa1on Period ` The state legislature has just enacted a community ra1ng regula1on, which requires insurance companies to set premiums at the same level for all buyers. Premiums set by sellers in this next period are subject to this new regula1on, and no seller can refuse a sale at the posted premium in light of the buyer's type.' 1. Sellers choose one premium 2. Post premiums on board 3. I will choose 6 cards at random telling me the buyer types this round 4. Ac1ng as buyers, I will choose policies to buy, or not 5. Record results on sheet and on board 6. Repeat 2 more 1mes Insurance Mandate Period To deal with the asymmetric informa1on problem, the government has decided to impose an insurance mandate requiring everyone to purchase insurance (in addi1on to the community ra1ng regula1on). 1. Sellers choose one premium 2. Post premiums on board 3. I will choose 6 cards at random telling me the buyer types this round 4. Ac1ng as buyers, I will choose which policies to buy (cannot choose not to buy in these rounds) 5. Record results on sheet and on board 6. Repeat 2 more 1mes 2 Discussion What happened to sellers' earnings over the first few periods of the game, and why? How were sellers affected by the community ra1ng regula1on, and did sellers adopt a specific strategy under this regime? How were sellers affected by the insurance mandate? What happened to premiums? 3 ...
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- Spring '11