Discussion Board 2 (15 pts.

, individual): Asymmetric Information

Sentence Count: 12 – 25 sentences, TOTAL

Post only once, no editing allowed. Your answers should follow the numbering order of
the questions.

Note: You might refer also to “The Lemons Problem,” Ch. 8 of Notes, to add to your
understanding of asymmetric information.

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Instructions: Choose only one of the three industries you’d like to discuss—(1) or (2)
or (3), but not both or all three. Answer/discuss below all the questions under each
industry you’ve chosen (from 1a to 1d, or 2a to 2d, or 3a to 3d). Write in your own
words. Do not copy another student’s idea or ideas. Come up with your own. Your
discussion board answers should run from 12 to 25 sentences total, no more, and
should follow the numbering system below. Show your understanding of the basic
concepts discussed in the background material, Ch. 8 notes, and/or the video tutorials,
if any. Exhibit your critical thinking skills in your reasoning/arguments. Show your
imagination in your answers. If you have to lift or use quotes or phrases from published
sources, cite/reference those sources properly. Write your sentence count at the top of
your post in the discussion board.

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(1) Asymmetric Information in the Health Insurance

Industry

(1a) Describe how asymmetric information might exist in the health insurance industry
(discuss the players or participants, who has more information, why, distinguish
between good-risk and bad-risk applicants, etc.).

(1b) What is or are the implication(s) of the asymmetric information situation on the
behavior or action of the participant(s)? How might each party respond to the situation?

(1c) What are the possible adverse effect(s) on society of the asymmetric information
problem in this industry? Explain.

(1d) How might the health insurers (and/or the government for that matter) minimize or
help minimize or reduce the adverse effect(s) of the asymmetric information problem in
this industry? What steps might be taken? Explain your reasoning. What’s the likelihood
of success of these steps? Why?
 (2) Asymmetric Information in the Home (House)
Insurance Industry

(2a) Describe how asymmetric information might exist in the home insurance industry
(discuss the players or participants, who has more information, why, distinguish
between good-risk and bad-risk applicants, etc.).

(2b) What is or are the implication(s) of the asymmetric information situation on the
behavior or action of the participant(s)? How might each party respond to the situation?

(2c) What are the possible adverse effect(s) on society of the asymmetric information
problem in this industry? Explain.

(2d) How might the home insurers (and/or the government for that matter) minimize or
help minimize or reduce the adverse effect(s) of the asymmetric information problem in
this industry? What steps might be taken? Explain your reasoning. What’s the likelihood
of success of these steps? Why?

(3) Asymmetric Information in the Auto Insurance

Industry

(3a) Describe how asymmetric information might exist in the auto insurance industry
(discuss the players or participants, who has more information, why, distinguish
between good-risk and bad-risk applicants, etc.).

(3b) What is or are the implication(s) of the asymmetric information situation on the
behavior or action of the participant(s)? How might each party respond to the situation?

(3c) What are the possible adverse effect(s) on society of the asymmetric information
problem in this industry? Explain.

(3d) How might the auto insurers (and/or the government for that matter) minimize or
help minimize or reduce the adverse effect(s) of the asymmetric information problem in
this industry? What steps might be taken? Explain your reasoning. What’s the likelihood
of success of these steps? Why?

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