This article considers an economy where risk is insurable, but selection determines the pool of individuals who take it up. First, we demonstrate that the comparative statics of these economies do not necessarily depend on its marginal selection (adverse versus favorable), but rather other...

Asymmetric information can lead to adverse selection and market failure. In a dynamic setting, asymmetric information also limits reclassification risk. This certainty offsets the costs of adverse selection. Using a dynamic model of endogenous insurance choice and price calibrated to the U.S....