Which of the following is not an assumption of hidden characteristics in automobile insurance markets?
A)probability of loss from a collision is not uniform across drivers
B)all drivers are risk averse
C)each driver's completely informed about their own characteristics
D)drivers risk characteristics cannot be communicated to insurance companies

Question

Quizplus · Accepted Answer

The assumption that all drivers are risk averse is not specific to hidden characteristics in automobile insurance markets. Hidden characteristics, such as a driver's true risk level, are about information asymmetry between the driver and the insurance company. Being risk averse is a general assumption about behavior, not about the asymmetry of information regarding risk characteristics.

Which of the Following Is Not an Assumption of Hidden