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Lemons and Peaches The impact of Asymmetrical Information on Healthcare in the NHS and how this can be addressed through the National Insurance System - Essay Example

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In the presence of asymmetric information in any market, buyers and sellers of that market do not have same amount of information. This asymmetric…
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Lemons and Peaches The impact of Asymmetrical Information on Healthcare in the NHS and how this can be addressed through the National Insurance System
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"Lemons and Peaches The impact of Asymmetrical Information on Healthcare in the NHS and how this can be addressed through the National Insurance System"

Download file to see previous pages er David Akerlof illustrated this situation elaborately in his famous work “The Market for Lemon” where he termed this situation as asymmetric information. He discussed this problem in the context of a used car market. He regarded the good car as peach and the bad cars as lemon. Akerlof argued that in a used car market a seller uses to have more information regarding the quality of a used car, i.e. the seller knows more accurately whether the car that he is selling is a peach or a lemon. But the buyer, on the other hand, uses to be in a more disadvantaged state as he posses less information regarding whether the car that he wants to buy is a peach or a lemon and hence the buyer can only make a guess whether the car would provide good service. (Akerlof, 1970; Arrow, 1963)
Information asymmetry problem is not a problem of any particular market. In fact, most of the markets face this kind of informational problem, although degree of this problem differs from market to market. Typically when there exists information asymmetry problem in any market, it is mainly the sellers who possess more information about the product than the buyers during the process of transaction; however, in some cases the reverse can also take place. Health care system is not an exception and it also faces severe information asymmetry problem. Information asymmetry is present in the market of health care as well as in the market of health insurance. It would be quite interesting to look at the nature of information asymmetry in health care sector and how this problem can be dealt with to avoid any kind of market failure. (Arrow, 1963; Blomqvist and Leger, 2003)
In the national health care system of any country, the relationship between physician and patients is regarded as the key relationship that the health care market has to deal with. In the presence of information asymmetry there exists a gap between the patients and the medical service providers regarding the price of the product as ...Download file to see next pagesRead More
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