Question

1. Describe the insurance contract offered to the robust in the asymmetric information separating equilibrium with the one offered in a symmetric information setup. Do you see differences in what is offered? Why? Only text, no graphs. This question is only about the contracts for the robust, don't explain frail situation!

Answer 1

The conclusion of asymmetric information is found in the market for insurance . It is seen that the individuals over age 65 discovered trouble in buying medical insurance because older people do have a much higher risk of serious illness .
The individuals who purchase insurance discover substantially more about their general healthnthan insurance organization ,except if it is demanded for clinical assessment. In such circumstance there is an inclination that undesirable individuals bound to need insurance hence the extent of unfortunate individuals in the pool of guaranteed individuals increases.This bring about increment in cost of insurance and the extent of helathy individuals in the pool of safeguarded individuals will be low.

Consequently as the cycle proceeds until a large portion of the individuals who need to be safeguarded will be undesirable people.Thus insurance turns out to be over the top expensive and the organizations may quit selling insurance

This discloses the agreement offered to the hearty in the asymmetric information seperating equlibrium with the one offered in a symmetric set up. The person who offers symmetric information on his wellbeing through any clinical assessment can enable the insurance to organization to fuse them in the market along these lines the cost will be decreased to reach equlibrium.

Other savvy due to assymetric information the unfortunate individuals will get protected and friends faces high risk. So the costs of insurances will increment. There will be contrasts in insurance offered and it is a direct result of the asymmetric iformation.

So as to stay away from this the arrangement that can be actualized is pooling risk . the legislature can give insurance to age over 65 so risk are spread and diminishes the value climb.C