1. The marginal cost pricing model computes a mark-up over marginal costs using estimates of the price elasticity of demand. Will any other pricing strategy result in higher profits?
2. Price discrimination needs the ability to distinguish customers who are the most price- sensitive and the ability to prevent arbitrage (resale of your products by customers who buy at low prices). What attributes of healthcare products make these tasks easy to do?
3. Explain some healthcare situations in which an agent has taken advantage of a principal. Now explain some healthcare transactions that have not taken place because of fears about asymmetric information.
4. What are some strategies for reducing adverse selection in insurance markets? What sorts of problems do these solutions cause?