TAILIEUCHUNG - Multidimensional screening in a monopolistic insurance market: proofs

For the last 100 years, a health care regulatory project enthusiastically endorsed by generations of health policy experts has been encrusting . health care with layer upon layer of increasingly intrusive regulation. Though each regulation may be innocuous in its own right, taken together they have had the unfortunate effect of divorcing patients from spending on their health, creating explosive growth in Wisconsin’s Medicaid budget, and making Wisconsin’s market for hospital services one of the least competitive in the United States. In hindsight, the regulatory program had had three major achievements. It has excluded consumers from health care decisions, consistently moving the power to make decisions. | SB IVTTTTT linn INSTITUTT FOR SAMFUNNS0KONOMI DEPARTMENT OF ECONOMICS SAM 21 2011 ISSN 0604-6324 November 2011 Discussion paper Multidimensional screening in a monopolistic insurance market proofs BYu Olivella AND Fred Schroyen This series consists of papers with limited circulation intended to stimulate discussion Norges Handelshoyskole NORWEGIAN SCHOOL OF ECONOMICS. Multidimensional screening in a monopolistic insurance market proofs Pau Olivella and Fred Schroyeny 28 11-2011 Abstract This technical paper contains the proofs of all lemmata propositions and other statements made in the paper Multidimensional screening in a monopolistic insurance market. Departament d Economia i d Historia Economica and CODE Universitat Autónoma de Barcelona Edifici B E-08193 Bellaterra Spain . E-mail . Department of Economics NHH Norwegian School of Economics Helleveien 30 N-5045 Bergen Norway and Health Economics Bergen HEB . E-mail . 1 I Introduction This technical paper contains the proofs of all lemmata propositions and other statements made in the paper Multidimensional screening in a monopolistic insurance For convenience we reproduce in the next section some of the main definitions assumptions and notational conventions used in that paper and restate the main problem. In section 3 we present the proofs of the no-distortion-at-the-top no-rent-at-the-bottom result Theorem 1 and the proofs of the optimal contract menu when insurance takers only differ in risk type Theorem 2 in risk aversion Theorem 3 and when risk type and risk aversion are perfectly positively correlated Theorem 4 . Section 4 deals with the two-dimensional heterogeneity case after a reminder of some definitions and assumptions Section we reformulate the main proposition of the paper Section and explain our strategy to prove it Section . This strategy consists of four steps these are dealt with in Sections 5 6 7 and 8 respectively. Section 8 concludes

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