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This research aims to quantify welfare loss related to inefficient pricing in insurance markets affected by selection.

Estimating Welfare in Insurance Markets Using Variation in Prices*

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This research aims to quantify welfare loss related to inefficient pricing in insurance markets affected by selection.
Analyzed price variation to estimate insurance demand and insurer costs.
Applied empirical methods using data from employer-provided health insurance.
Tested for adverse selection using the estimated cost curve.
Detected adverse selection in the insurance market.
Estimated quantitative welfare implications of inefficient pricing to be small both absolutely and relatively.

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Graphical illustration quantifies welfare loss from inefficient pricing in insurance markets, indicating small implications.

Einav et al. (2010) studied this question.

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