Chapter 29 - Imperfect Information: Adverse Selection and Moral Hazard

asymmetric information

asymmetric information

The ________ in the market generates a downward spiral of price and quality:

experience rating

An** ________** is a situation in which insurance companies charge different prices for medical insurances to different firms depending on the past medical bills of a firms employees.

ValueStar

________ is a consumer guide and a business directory that uses customer satisfaction surveys to determine how well a firm does relative to its competitors in providing quality service.

Deductibles

________ reduce the moral- hazard problem because they shift to the policyholder part of the cost of a claim on the policy.

lemons model

The ________ makes two predictions about markets with asymmetric information.

asymmetric situation

An** ________** is a situation in which one side of the market- either buyers or sellers- has better information than the other.

Insurance companies

________ use various measures to decrease the moral- hazard problem.

adverse selection problem

An** ________** is a situation in which the uniformed side of the market must choose from an undesirable or adverse selection of goods.

demand curve

The ________ for high- cost people is higher than the curve for low- cost people, reflecting their larger benefits from having medical insurance.

Consumer expectations

________ play a key role in determining the market outcome when there is imperfect information.

low repair

A high- quality car, also known as a "plum, "is reliable and has relatively ________ costs.