Information Spillovers, Margins, Scale and Scope: With an Application to Canadian Life Insurance
AbstractA model of the production of life insurance services is developed. The focus is on price setting ability and the cost advantages from size and diversity. The model characterizes insurers decisions on the face value and number of policies and the number of insurance lines. The model is applied to Canadian life insurance firms. Unit revenue-cost margins average from 13 percent to 40 percent across lines of insurance. These margins emanate from information spillovers generated by marketing activities. Cost advantages due to size are small, but are substantial from diversity. Returns to scale average from 1.13 to 1.40, while returns to scope from offering multiple insurance lines average from 70 percent to 100 percent. Copyright 1992 by The editors of the Scandinavian Journal of Economics.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.
Volume (Year): 94 (1992)
Issue (Month): 0 (Supplement)
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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442
Other versions of this item:
- Jeffrey I. Bernstein, 1992. "Information Spillovers, Margins, Scale and Scope: With an Application to Canadian Life Insurance," NBER Working Papers 3979, National Bureau of Economic Research, Inc.
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