<p>When health plans compete under adverse selection, the competitive equilibrium set of contracts is unique. However, the allocation of these contracts among health plans is undetermined. We show that three health plans suffice to sustain an equilibrium where each health plan offers a single contract and attracts a single type of agent (full specialization). We also show that this equilibrium can be ruled out by introducing any horizontal differentiation, and that if in equilibrium each health plan attracts all types of agents, at least one of the health plans must do so through a menu of contracts.</p>
Authors
Marcos Vera-Hernandez
Research Fellow University College London
Marcos is a Research Fellow at IFS, an Affiliate at the Rural Education Action Program and a Professor of Economics at the University College London.
Pau Olivella
Suggested citation
Olivella, P and Vera-Hernandez, M. (2010). 'How complex are the contracts offered by health plans?' (2010)
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