In the activity you were asked to make a series of decisions in a health insurance market.
Question:
In the activity you were asked to make a series of decisions in a health insurance market. Here are the data from our insurance experiment (actually this is data from a previous class so that we can have this discussion in a timely fashion). Seventy students participated in the experiment. Decision 1 Data: In this decision you did not know if you were healthy or sick. Of the seventy students who participated, 97.1% chose to buy insurance in Decision #1. Thirty six of the students were sick and of those 36, twenty one of them became ill. All of the ill participants were insured except one. Decision 2 Data: In this decision every person was assigned a type of either healthy or sick. 33 of the 70 students were healthy and the other 37 were sick. 50 people buy insurance. 19 people become Ill. All 19 people who become Ill have purchased insurance. Discussion: If you post your answers to each of the three questions below before the deadline, you will get the full ten points for the discussion. The questions do not need to be answered mathematically or with a calculation. If you feel the need to use mathematics to make a calculation, then you are free to do so but the questions are merely asking you for a number and how you arrived at that number. If you do not do any calculations to arrive at the number, just say how you arrived at the number. (There are no incorrect answers.)
Discussion question 1: If you purchased insurance in decision 1, what would be the maximum number of points you would have paid to purchase insurance? Explain how you arrive at this number. If you did not purchase insurance, at what price would you be willing to purchase insurance? Explain how you arrive at this number.
Discussion question 2: For this question I want you to think of yourself as the insurance company which is selling insurance. If you knew the data from decision 1, what would be the minimum price you would sell insurance at? Explain how you arrive at this number.
Discussion question 3: Again, for this question I want you to think of yourself as the insurance company which is selling insurance. Given the information from decision 2 and assuming that people know if they are sick or healthy, what would be the minimum price you would sell insurance at in this market? Explain how you arrive at this number.
Microeconomics Theory and Applications with Calculus
ISBN: 978-0134167381
4th edition
Authors: Jeffrey M. Perloff