Q214. Explicate and comment:

Akerlof generalized this model to a number of markets in which there is unequal information on the two sides - insurance companies know less than you do, usually, about whether you are accident prone, or susceptible to hereditary diseases, or are contemplating suicide. Life insurance rates for sixty-five-year-olds must allow for a large fraction who are not long for this world. And those who know they are healthy and have a family history of longevity and are exposed to few risks have to pay the same premium as the poorer risks; life insurance being unattractive [to them] at that price, few of them buys it. The average life expectancy of the customers goes down, the rates go up further, and the bargain now looks poor even to those of normal life expectancy. And so forth.

…. It is akin to, and sometimes coincides with, those situations in which the below average, or the above average, withdraw or won't join, causing some potential market or institution to unravel. Because people vary and because averages matter, there may be no sustainable critical mass; and the unraveling behavior, or initial failure to get the activity going at all, has much the appearance of a critical mass that is almost but not quite achieved (Schelling 1978: 159.5-7).