Market Failure In The Healthcare Industry

Another element of market failure is asymmetric information, which occurs when the economic agents involved in a transaction have disparate amounts of information. As Francis Bacon states, “knowledge is power”, and superior amounts of information could result in undesired outcomes for one party in the transaction. Such is the problem that plagues healthcare insurance businesses, as the patient has more knowledge about their health risks and infirmities than the insurers do, which results in higher prices as the insurer attempts to pay for the customers with significant health risks and aversion from healthcare by those consumers who have low-risk health and lack desire to pay the higher prices. In the healthcare market, asymmetric information