<p>Health insurance. If an insurance company must charge a single premium because they cannot distinguish between low risk and high risk individuals, they will charge a premium based on average risk. As a result the proportion of high risk individuals in the pool of insured individuals increases, whilst the proportion of low risk individuals decreases (healthy individuals are less willing to pay a high price of insurance), which pushes up the average price of premiums, further reduces the proportion of low risk individuals, etc. The market fails.</p>

CC BY-SA 3.0
2017-04-12T21:49:39.770Z
2017-04-12T21:49:39.770Z
Cec
<p>How can the idea of Akerlof's 'lemons' be applied to goods and services markets (that doesn't include second-hand cars)?</p>

CC BY-SA 3.0
2017-04-07T13:05:10.663Z
What is the difference between the second-hand car market and other markets?
Oliv
<microeconomics><markets><asymmetric-information>
What are some applications of Akerlof's 'lemons' in goods and services markets?
staircase
# What are some applications of Akerlof's 'lemons' in goods and services markets?

(Asked by: username_0 on 2017-04-07)

How can the idea of Akerlof's 'lemons' be applied to goods and services markets (that doesn't include second-hand cars)?

**Tags:** microeconomics, markets, asymmetric-information
> **Comments:**
> **username_1**: What is the difference between the second-hand car market and other markets?  

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## 1 answers

### Answer by username_2 on 2017-04-12. Score: 1

Health insurance. If an insurance company must charge a single premium because they cannot distinguish between low risk and high risk individuals, they will charge a premium based on average risk. As a result the proportion of high risk individuals in the pool of insured individuals increases, whilst the proportion of low risk individuals decreases (healthy individuals are less willing to pay a high price of insurance), which pushes up the average price of premiums, further reduces the proportion of low risk individuals, etc. The market fails.


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