Question

1. In a test for asymmetric information in the French auto insurance market, Chiappori and Salanié [2000] look at the relationship between the comprehensiveness of an individual’s policy and the cost per unit coverage. Their argument is that, in the presence of asymmetric information, the more comprehensive the coverage, the greater the cost per franc of coverage. Explain the reasoning behind this argument. (By the way, they find no evidence for asymmetric information on this basis.)


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  • CreatedMarch 25, 2015
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