Economics Discussion 5

“Public Goods and Moral Hazard”

Identify a product that you have consumed in the past couple of months and explain what makes the product a public good, based on the characteristics of a public good as defined in this week’s textbook readings.

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In 2020, a leading insurance company started a policy that pays policyholders a 5 percent rebate on their insurance premium in a year in which the policyholders do not file an insurance claim. For example, a household with an annual premium of $1,200 will get a $60 rebate check each year it does not file a claim. Identify what problem(s) the insurance company is trying to solve by introducing this policy.