
	Where results make sense

Topic: Adverse selection

Related Topics

Information asymmetry

Insurable risk

The Market for Lemons

Health insurance

Moral hazard

Arbitrage

Behavioural economics

Moral purchasing

Auction

Big Push Model

Transaction cost

Corporate governance

Economics

Green economics

Aggregate supply

	Adverse selection - Wikipedia, the free encyclopedia
		Adverse selection or anti-selection is a term used in economics and insurance.
		The term adverse selection was originally used in insurance.
		In the usual case, a key condition for there to be adverse selection is an asymmetry of information - people buying insurance know whether they are smokers or not, whereas the insurance company doesn't.
	en.wikipedia.org /wiki/Adverse_selection (773 words)

	EEOC Uniform Employee Selection Guidelines Questions and Answers
		The selection rates for males and females are compared, and the selection rates for the race and ethnic groups are compared with the selection rate of the race or ethnic group with the highest selection rate.
		The alternative selection procedure (or method of use) should be used when it has less adverse impact and when the evidence shows that its validity is substantially the same or greater for the same job in similar circumstances.
		When a specific score on a selection procedure has a different meaning in terms of expected job performance for members of one race, sex or ethnic group than the same score does for members of another group, the use of that selection procedure may be unfair for members of one of the groups.
	www.uniformguidelines.com /questionandanswers.html (13797 words)

	Adverse Selection and Cream Skimming - Health Insurance Information (Site not responding. Last check: 2007-11-03)
		Adverse selection can be reduced by letting insurers set more accurate premiums by giving them more information or lifting restrictions on how premiums are set.
		Adverse selection can be also reduced by restricting consumer choice by offering only one insurance plan for a group or by mandating that everyone buy a given plan.
		Finally, adverse selection can also be reduced by restricting the timing of consumer choice by having "waiting periods" before someone can buy insurance or by excluding "pre-existing conditions." However, this can cause people with chronic illness or high-risk dependents to be afraid to switch employers and is now limited by HIPAA.
	www.health-insurance-info.net /adverse-selection-cream-skimming.html (554 words)

	Yale Law Journal \| P. Siegelman, Adverse Selection in Insurance Markets: An Exaggerated Threat
		And while the economic theory of adverse selection in insurance markets has become enormously sophisticated, much of it is devoted to rarified analysis of the nature and existence of equilibria.
		In short, while adverse selection in insurance markets is clearly a possibility, it is often not the serious problem that it is taken to be.
		The common theme of these actors’ analyses is that adverse selection is an extremely significant problem—one that justifies deference to longstanding common law doctrines in tort and contracts and a hands-off attitude with regard to insurance regulation.
	www.yalelawjournal.org /archive_abstract.asp?id=187 (840 words)

	MODULE 5 Key Elements of a Labor Program :: Severance
		In many severance schemes there are concerns about adverse selection: that is, there is concern that the program will lead to the departure of the best workers and thereby result in the loss of critical skills and in the subsequent rehiring of workers who have received public money for severance.
		Selection can be imposed through eligibility restrictions, which only allow certain groups of workers to participate in a voluntary departure plan.
		To illustrate, there could be no selection for unskilled cadres who are all surplus workers or for all workers in a regional unit to be closed, but active selection by management of all other cadres.
	rru.worldbank.org /documents/toolkits/labor/toolkit/module5/severance_adverse_selection.html (2612 words)

	Adverse - Wikipedia, the free encyclopedia
		Adverse or adverse interest, in law, is an anything that functions contrary to a party's interest.
		Often, the rules of examination for an adverse witness, or a witness called by an adverse party, are different and include the ability to ask leading questions.
		In property law, adverse possession refers to an interest in real property which is contrary to the in-fact owner of the propery.
	en.wikipedia.org /wiki/Adverse (135 words)

	How well do adverse selection components measure adverse selection? - Statistical Data Included Financial Management ...
		The performance of five adverse selection models are examined by comparing their component estimates to other measures of information asymmetry and informed trading.
		To determine the usefulness of the adverse selection models in measuring information problems, the relation between adverse selection components and measures of information asymmetries and various proxies for the presence of informed traders are examined.
		If we look beyond the transaction data, adverse selection costs are likely to be a function of the degree of asymmetric information surrounding the stock's true value and the probability that informed traders can capitalize on this asymmetric information.
	www.findarticles.com /p/articles/mi_m4130/is_3_30/ai_82273328 (976 words)

	SSRN-Adverse Selection in Insurance Markets: An Exaggerated Threat by Peter Siegelman
		Adverse selection is the process by which insureds who know their own risk of loss take advantage of this information to choose insurance coverage in a way that works to the detriment of their insurer.
		After documenting the existence of these fears, I demonstrate that the empirical basis for the importance of adverse selection is limited, the economic theory underlying the phenomenon is not robust, and that there are alternative plausible theories of insureds' behavior that lead to startlingly different results.
		Adverse selection does sometimes occur, but it has cast too large a shadow on insurance law and regulation.
	papers.ssrn.com /sol3/papers.cfm?abstract_id=434604 (286 words)

	Prof
		Of course, the effect of adverse selection could be less severe.
		The implications of adverse selection are often poorly understood.
		Adverse selection is probably economists' favorite argument for insurance regulation - most credibly, for regulations requiring everyone to buy insurance.
	www.gmu.edu /departments/economics/bcaplan/e812/micro7.htm (1517 words)

	RiskProf : Adverse Selection
		Adverse selection is getting to be like Santa Clause.
		Alex Taborrok at MR provides a short literature review of the lack of empirical evidence of adverse selection in insurance and auto resale markets.
		In fact, of all the market failures in insurance markets, adverse selection is likely the easiest to remedy without government intervention because there is a profit incentive for the insurer to do so.
	riskprof.typepad.com /tort/2005/12/adverse_selecti.html (315 words)

	Testing for Adverse Selection with "Unused Observables"
		This paper proposes a new test for adverse selection in insurance markets based on observable characteristics of insurance buyers that are not used in setting insurance prices.
		We apply this test to a new data set on annuity purchases in the United Kingdom, focusing on the annuitant’s place of residence as an “unused observable.” We show that the socio-economic status of the annuitant’s place of residence is correlated both with annuity purchases and with the annuitant’s prospective mortality.
		This is consistent with the presence of adverse selection.
	ideas.repec.org /p/nbr/nberwo/12112.html (823 words)

	How adverse selection affects the health insurance market
		Adverse selection can be defined as strategic behavior by the more informed partner in a contract against the interest of the less informed partner(s).
		Drawing on theoretical literature on the problem of adverse selection in the health insurance market, the author synthesizes concepts developed piecemeal over more than 20 years, using two examples and revisiting the classical contribution of Rothschild and Stiglitz.
		Regulation can exacerbate the problem of adverse selection and lead to chronic market instability, so certain steps must be taken to prevent risk screening and preserve competition for the market.
	ideas.repec.org /p/wbk/wbrwps/2574.html (667 words)

	Addressing Adverse Selection in Private Health Insurance Markets: Statement of Linda J. Blumberg before the Congress of ...
		The small group and individual insurance markets are of greatest concern with regard to adverse selection, since their variability of expenditures year-to-year is much higher than for large groups.
		Fears of adverse selection and the natural drive to maximize profits, drives insurers in unregulated markets to use strategic behavior in the pursuit of a disproportionate share of low cost enrollees.
		Using this information to adjust for selection bias, an important econometric correction that has been neglected in all other studies of premiums in the non-group market, the authors also found that people with significant health problems would face non-group premiums roughly 50 percent higher than their healthier counterparts.
	www.urban.org /publications/900752.html (5983 words)

	Adverse selection, unstable (Site not responding. Last check: 2007-11-03)
		NOW's breakthrough analysis is the first to apply the adverse selection phenomenon to solve a decades old dilemma: Automobile insurers charge the highest premiums in low-income zip codes.
		Major adverse selection against risk pools, however, does take place in the low-income market, which insurers call "hard to serve." An explanatory essay we wrote for a university textbook begins: 'Although forty-eight states make automobile insurance mandatory, tens of millions of cars still go uninsured.
		Although the prospective upward spiral of average miles and premiums in traditional risk pools is why insurers are afraid to offer a choice, it is identical to the adverse selection that occurs in low-income areas today.
	www.centspermilenow.org /745AdvSel.htm (738 words)

	BOI - Adverse Selection and the Market for Annuities
		Adverse selection is often blamed for the thinness of the annuities market.
		We show that, in principle, it is preferable to contract before the survival information is revealed, i.e., the deferred annuities equilibrium is better than the adverse selection equilibrium of immediate annuities.
		We conclude that adverse selection is not the cause for the thinness of the annuities market.
	www.bankisrael.gov.il /deptdata/neumim/neum133e.htm (228 words)

	ColombiaLink.com - ADVERSE SELECTION - MARKET FAILURE - ECONOMICS
		It describes a situation where the people who take out insurance are more likely to make a claim than the population of people used by the insurer to set their rates.
		The insurance company ends up losing money, because (in the extreme) only smokers insure themselves, and they have a higher mortality rate than the one the insurance company used when it calculated the premium.
		In this case, there may not be an actual asymmetry of information, the insurance company may know who is or isn't a smoker, but, the insurer not being allowed to act on that information, there is a "virtual" asymmetry of information.
	colombialink.com /01_INDEX/index_finanzas_eng/adverse_selection.html (583 words)

	Simulating the effects of employer contributions on adverse selection and health plan choice - Health Plan Choice ...
		The adverse selection within the Harvard system was sufficient to drive the most generous policy out of the market within three years.
		The Group Insurance Commission of Massachusetts moved to contain the adverse selection by subsidizing premiums on a proportional basis and managing the most generous policy very tightly (Cutler and Zeckhauser 1997).
		The family is assumed to select the insurance plan that results in the highest expected utility.
	www.findarticles.com /p/articles/mi_m4149/is_4_34/ai_57796339 (916 words)

	NCPA - BA #183 - Medical Savings Accounts for Medicare: The Adverse Selection Issue
		The process in which healthy people shift to one insurance pool while sick people remain in another is known as adverse selection, and it can lead to escalating premiums in the pool containing a disproportionate number of sick people.
		Adverse selection occurs only if healthy people can benefit financially by moving to an insurance pool that sick people would want to avoid.
		One way of avoiding any adverse selection problem that might arise in the private sector options is by adjusting the payments Medicare makes to private insurers.
	www.ncpa.org /ba/ba183.html (1209 words)

	Estimating the Adverse Selection and Fixed Costs of Trading in Markets with Multiple Informed Traders - Federal Reserve ... (Site not responding. Last check: 2007-11-03)
		Authors: Sugato Chakravarty, Asani Sarkar, and Lifan Wu We investigate, both theoretically and empirically, the relation between the adverse selection and fixed costs of trading and the number of informed traders in a financial asset.
		Further, the adverse selection (fixed) costs of trading: (1) decrease (increase) with the number of dual traders m, if dual traders are risk neutral; and (2) are a single-peaked (U-shaped) function of m, if dual traders are risk averse.
		Using data from four selected futures contracts, we find that the number of dual traders are a significant determinant of both the adverse selection and fixed costs of trading, after controlling for the effects of other determinants of market liquidity.
	www.ny.frb.org /research/staff_reports/research_papers/9814.html (227 words)

	Selection Resources - Professional Personality and Intelligence Testing - Legality & Validity
		When the Achiever is properly implemented and utilized in conjunction with other standard hiring and interviewing procedures, it strengthens the employers' position of taking affirmative action to ensure that applicants and employees are treated fairly without regard to race, color, age, religion, sex or national origin.
		This rule was designated by the E.E.O.C. as a computation tool to establish a basis to show whether or not a company is having an adverse impact in their hiring practices.
		This hiring pattern results in adverse selection of minorities, since 1/2 as many minorities are hired as whites (or 30/60), whereas the hiring ratio must equal 4/5th as many minorities as whites.
	www.selectionresources.com /legality.cfm (1312 words)

	Deinonychus antirrhopus: October 2003 Archives (Site not responding. Last check: 2007-11-03)
		Since I did a post on adverse selection (well, pointed to a post on adverse selection), I thought one that was a bit more detailed on the underlying theory would be a good idea.
		Adverse selection is more of a problem in health insurance markets.
		Adverse selection is basically a problem where different events have different probabilities of producing unfavorable outcomes, and individuals who are involved in the event know these probabilities while others do not.
	www.steveverdon.com /archives/2003_10.html (16035 words)

	EconPapers: Adverse Selection in Health Insurance
		Such adverse selection induces three types of losses: efficiency losses from individuals being allocated to the wrong plans; risk sharing losses since premium variability is increased; and losses from insurers distorting their policies to improve their mix of insureds.
		We discuss the potential for these losses, and present empirical evidence on adverse selection in two groups of employees: Harvard University, and the Group Insurance Commission of Massachusetts (serving state and local employees).
		At the GIC, adverse selection has been contained by subsidizing premiums on a proportional basis and managing the most generous policy very tightly.
	econpapers.repec.org /paper/nbrnberwo/6107.htm (348 words)

	"Is Adverse Selection Simply Moral Hazard? Evidence from the 1987 Medical Expenditure Survey"
		There continues to be a lack of consensus about the presence of adverse selection in health plan markets.
		Previous studies conducted tests using data that covered only a certain segment of the entire population, and none modeled the role that risk aversion plays in the selection of plans.
		This study accounts for these characteristics and finds that not only is adverse selection present, but that there is an additional market failure since individuals are not fully compensated for their efforts at preventing both illness and accidents.
	stats.bls.gov /ore/abstract/ec/ec020090.htm (129 words)

	News Articles
		What about the adverse selection problem, that only the sickest insurees will be attracted to the plans with the most benefits?
		Among these three factors, which does the article suggest are the most and the least important in understanding the challenges facing the satellite insurance industry: (1) economies of scale, i.e.
		financial pooling; (2) adverse selection of insurees; (3) moral hazard / incentives of insurees.
	radio.weblogs.com /0113343/categories/adverseSelection (530 words)

	Equilibrium and Adverse Selection -- from Mathematica Information Center
		The nature of equilibrium in markets with adverse selection evoked considerable interest following George Akerlof's seminal article on the market for lemons.
		Akerlof argued that markets with adverse selection may yield no equilibrium.
		In this article it is shown that if the distribution of quality follows some standard distribution, then a unique equilbrium will result.
	library.wolfram.com /infocenter/Articles/1161 (74 words)

	Adverse Selection
		American economist George Arthur Akerlof (1940-) first noted adverse selection problem (sometimes referred to as the lemon problem), which arises from the inability of traders/buyers to differentiate between the quality of certain products.
		The most cited example is the second hand car industry, in which a trader dealing in, for example, Minis possesses product information that the other buyers/sellers in that market lack.
		Insurance and credit markets are areas in which adverse selection is important.
	www.economyprofessor.com /economictheories/adverse-selection.php (234 words)

Try your search on: Qwika (all wikis)