Price Adjustment in an Automobile Insurance Market: A Test of the Sheshinski-Weiss Model
Abstract
Nominal price rigidity is explained in the Sheshinski-Weiss (SW) model by costly price adjustment. The predictions of the SW model, which describe a firm's optimal forward-looking price adjustment strategy, were derived and tested using microdata on the timing and the magnitude of premium changes by sixty-nine firms in the Alberta automobile insurance market over the period 1974-82. The model was tested by estimating the structural equations of the model, probit equations for premium changes, and reduced-form equations for the firm's new premium and its old premium. The overall conclusion is that the SW model does not explain the price adjustments observed in the Alberta automobile insurance market.Download Info
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Bibliographic Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 25 (1992)
Issue (Month): 3 (August)
Pages: 564-83
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Handle: RePEc:cje:issued:v:25:y:1992:i:3:p:564-83
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Erwan Gautier, 2009.
"Les ajustements microéconomiques des prix : une synthèse des modèles théoriques et résultats empiriques,"
Revue d'économie politique,
Dalloz, vol. 0(3), pages 323-372.
- Gautier, E., 2008. "Les ajustements microéconomiques des prix : une synthèse des modèles théoriques et résultats empiriques," Working papers 211, Banque de France.
- Simon Hall & Mark Walsh & Anthony Yates, 1997. "How do UK companies set prices?," Bank of England working papers 67, Bank of England.
- O'Reilly, B., 1998. "The Benefits of Low Inflation: Taking Shock "A nickel ain't worth a dime any more" [Yogi Berra]," Technical Reports 83, Bank of Canada.
- J. Konieczny, A. Skrzpacz, 2006. "Search, Costly Price Adjustment and the Frequency of Price Changes - Theory and Evidence," Working Papers eg0054, Wilfrid Laurier University, Department of Economics, revised 2006.
- Asplund, Marcus & Eriksson, Rickard & Friberg, Richard, 2000.
" Price Adjustments by a Gasoline Retail Chain,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 102(1), pages 101-21, March.
- Asplund, Marcus & Eriksson, Rickard & Friberg, Richard, 1997. "Price adjustments by a gasoline retail chain," Working Paper Series in Economics and Finance 194, Stockholm School of Economics.
- Michael C. Davis & James D. Hamilton, 2003.
"Why Are Prices Sticky? The Dynamics of Wholesale Gasoline Prices,"
NBER Working Papers
9741, National Bureau of Economic Research, Inc.
- Davis, Michael C & Hamilton, James D, 2004. "Why Are Prices Sticky? The Dynamics of Wholesale Gasoline Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(1), pages 17-37, February.
- Emmanuel Dhyne & Jerzy Konieczny & Fabio Rumler & Patrick Sevestre, 2009. "Price rigidity in the euro area - An assessment," European Economy - Economic Papers 380, Directorate General Economic and Monetary Affairs, European Commission.
- Kim Scharf, 1999. "Tax incentives for extraction and recycling of basic materials in Canada," Fiscal Studies, Institute for Fiscal Studies, vol. 20(4), pages 451-477, December.
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