Revisiting Early Structural Findings of Asymmetric Information’s Non-Existence in Health Insurance


Cardon and Hendel (2001) presented the first structural model that studied adverse selection in the health insurance market—finding no evidence of informational asymmetries. More recent studies, however, have robustly demonstrated substantial evidence of adverse selection in health insurance markets. I demonstrate that once an error in the first-order condition of the maximization problem presented in Cardon and Hendel (2001) is corrected, while still not significant, the parameter capturing asymmetric information increases substantially.

The full study is available in Economics Letters.