Question: c) Imperfect price discrimination: Now suppose instead that MGH cannot ascertain individual patients' willingness-to-pay, but knows that on average, patients with private insurance enrolled in
c) Imperfect price discrimination: Now suppose instead that MGH cannot ascertain individual patients' willingness-to-pay, but knows that on average, patients with private insurance enrolled in DividedHealthCare (DHC) plans have a higher willingness-to-pay than those in Inhumana plans. MGH wants to maximize its profits from privately insured patients, and negotiates a different price with each insurer accordingly. Do you think this would generally lead to a deadweight loss in this market? Why or why not?
d) Relative deadweight loss: All else equal, will the total deadweight loss be greater under scenario a) or scenario c)? Why?
e) Efficiency and Consumer Surplus: Is it necessarily the case that an efficient outcome is necessarily the best one for consumers? Briefly explain.
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
