Appendix II: Questions to Accompany the Proposition 103 Assignment

Appendix to "Comparing Student Performance Using Cooperative Learning" by Daniel R. Marburger

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Please answer the following questions in the space provided below to prepare for next class.

Problem Identification

1. What problem led consumer groups to pass Proposition 103?

2. What facts suggest that a problem may exist?

3. According to proponents of Proposition 103, what is the source of the problem?

4. According to the two articles, what else might be the source of the problem? What facts support this alternative possibility?

Analysis

5. What does Proposition 103 require insurers to do? Why do proponents of the Proposition believe this will rectify the problem? (Incorporate your answer to q. 3).

6. Based on your answer to question 4, what else could result from Proposition 103?

7. In determining which scenario is likely to hold true, we need to analyze the California auto insurance industry.

1. How many firms are in the industry?
2. Would you consider auto insurance to be a highly differentiated product or a fairly undifferentiated product?
3. Given your answers to a and b, which market structure do you believe best characterises the California auto insurance industry?
4. 'The People vs. the Premiums' suggests the possibility that price-fixing by auto insurers is responsible for the high premiums. Based on your answer to c, what is the likelihood that this is the case?
5. The same article also reports allegations that insurers are 'disguising unconscionable profitability'. Based on your answer to c, what is the likelihood that this is true?

8. Based on your analysis in question 7, what would you expect to occur as a result of the passage of Proposition 103?

9. From what you know about this type of market structure, what would occur if the industry were left unregulated?

10. If you were to limit the alternatives toward choosing between Prop 103 and leaving the industry unregulated, which would you recommend as the best solution? Why?