The Consequences for a Monopolistic Insurance Firm of Evaluating Risk Better than Customers: The Adverse Selection Hypothesis Reversed
AbstractThis article models a situation in which a monopolistic insurer evaluates risk better than its customers. The resulting equilibrium allocations are compared to the consequences of the standard adverse selection hypothesis. On the positive side, they exhibit the property that low-risk people are better covered than higher-risk people. On the normative side, the article shows that there are two reasons for avoiding excessive risk classification: one is the classical destruction of insurance possibilities, and the other comes from the distrustful atmosphere generated by new asymmetric information. The Geneva Papers on Risk and Insurance Theory (2000) 25, 65–79. doi:10.1023/A:1008749524517
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Palgrave Macmillan in its journal The Geneva Papers on Risk and Insurance Theory.
Volume (Year): 25 (2000)
Issue (Month): 1 (June)
Contact details of provider:
Web page: http://www.palgrave-journals.com/
Postal: Palgrave Macmillan Journals, Subscription Department, Houndmills, Basingstoke, Hampshire RG21 6XS, UK
Other versions of this item:
- Villeneuve, Bertrand, 2000. "The consequences for a monopolistic insurance firm of evaluating risk better than customers : The adverse selection hypothesis reversed," Economics Papers from University Paris Dauphine 123456789/5367, Paris Dauphine University.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Amy Finkelstein & Kathleen McGarry, 2003. "Private Information and its Effect on Market Equilibrium: New Evidence from Long-Term Care Insurance," NBER Working Papers 9957, National Bureau of Economic Research, Inc.
- Jeleva, Meglena & Villeneuve, Bertrand, 2004.
"Insurance contracts with imprecise probabilities and adverse selection,"
Economics Papers from University Paris Dauphine
123456789/5358, Paris Dauphine University.
- Meglena Jeleva & Bertrand Villeneuve, 2004. "Insurance contracts with imprecise probabilities and adverse selection," Economic Theory, Springer, vol. 23(4), pages 777-794, May.
- Meglena Jeleva & Bertrand Villeneuve, 1997. "Insurance Contracts with Imprecise Probabilities and Adverse Selection," Working Papers 97-16, Centre de Recherche en Economie et Statistique.
- Kostas Koufopoulos, 2002. "Asymmetric information, heterogeneity in risk perceptions and insurance: an explanation to a puzzle," LSE Research Online Documents on Economics 24906, London School of Economics and Political Science, LSE Library.
- Leonidas Enrique de la Rosa, 2007.
"Overconfidence and Moral Hazard,"
Economics Working Papers
2007-08, School of Economics and Management, University of Aarhus.
- Deryugina, Tatyana, 2012. "Does Selection in Insurance Markets Always Favor Buyers?," MPRA Paper 53583, University Library of Munich, Germany.
- Villeneuve, Bertrand, 2000. "Life Insurance," Economics Papers from University Paris Dauphine 123456789/5369, Paris Dauphine University.
- Daniel McFadden & Carlos Noton & Pau Olivella, 2012.
"Remedies for Sick Insurance,"
620, Barcelona Graduate School of Economics.
- Daniel McFadden & Carlos Noton & Pau Olivella, 2013. "Remedies for Sick Insurance," Documentos de Trabajo 302, Centro de Economía Aplicada, Universidad de Chile.
- Daniel L. McFadden & Carlos E. Noton & Pau Olivella, 2012. "Remedies for Sick Insurance," NBER Working Papers 17938, National Bureau of Economic Research, Inc.
- Villeneuve, Bertrand, 2005.
"Competition between insurers with superior information,"
Economics Papers from University Paris Dauphine
123456789/5356, Paris Dauphine University.
- Villeneuve, Bertrand, 2005. "Competition between insurers with superior information," European Economic Review, Elsevier, vol. 49(2), pages 321-340, February.
- Wu, T.C. Michael & Yang, C.C., 2012. "The welfare effect of income tax deductions for losses as insurance: Insured- versus insurer-sided adverse selection," Economic Modelling, Elsevier, vol. 29(6), pages 2641-2645.
- Philippe Donder & Jean Hindriks, 2009. "Adverse selection, moral hazard and propitious selection," Journal of Risk and Uncertainty, Springer, vol. 38(1), pages 73-86, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elizabeth Gale).
If references are entirely missing, you can add them using this form.