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Research Details

Multidimensional Screening and Menu Design in Health Insurance Markets

Abstract

We study a general screening model that encompasses a health insurance market in which consumers have multiple dimensions of private information and a price-setting insurer (e.g., a monopolist or a social planner) offers vertically differentiated contracts. We combine theory and empirics to provide three novel results: (i) optimal menus satisfy intuitive conditions that generalize the literature on multidimensional screening and shed light on insurer incentives; (ii) the insurer's problem with an unlimited number of contracts is well-approximated with only a small set of contracts; and (iii) under an additional assumption, the problem becomes dramatically simpler and can be solved using familiar graphical analysis. Calibrated numerical simulations validate assumptions, quantify the differential incentives of a monopolist and a social planner, and evaluate common policy interventions in a monopoly market.

Type

Working Paper

Author(s)

Jeroen Swinkels, Hector Chade, Victoria Marone, Amanda Starc

Date Published

2022

Citations

Swinkels, Jeroen, Hector Chade, Victoria Marone, and Amanda Starc. 2022. Multidimensional Screening and Menu Design in Health Insurance Markets.

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