Advanced Search
MyIDEAS: Login to save this paper or follow this series

Identification of Insurance Models with Multidimensional Screening

Contents:

Author Info

  • Gaurab Aryal

    ()

  • Isabelle Perrigne

    ()

  • Quang Vuong

Abstract

We study the identification of an insurance model with multidimensional screening, where insurees are characterized by risk and risk aversion. The model is solved using the concept of certainty equivalence under constant absolute risk aversion and an unspecified joint distribution of risk and risk aversion. The paper then analyzes how data availability constraints identification under four data scenarios from the ideal situation to a more realistic one. The observed number of accidents for each insuree plays a key role to identify the model. In a first part, we consider the case of a continuum of coverages offered to each insuree whether the damage distribution is fully observed or truncated. Truncation arises from that an insuree files a claim only when the accident involves a damage above the deductible. Despite bunching due to multidimensional screening, we show that the joint distribution of risk and risk aversion is identified. In a second part, we consider the case of a finite number of coverages offered to each insuree. When the full damage distribution is observed, we show that despite additional pooling due to the finite number of contracts, the joint distribution of risk and risk aversion is identified under a full support assumption and a conditional independence assumption involving the car characteristics. When the damage distribution is truncated, the joint distribution is identified up to the probability that the damage is above the deductible. In a third part, we derive the restrictions imposed by the model on observables for the fourth scenario. We also propose several identification strategies for the damage probability at the deductible. These identification results are further exploited in a companion paper developing an estimation method with an application to insurance data

Download Info

If 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.
File URL: http://cbe.anu.edu.au/research/papers/pdf/wp538.pdf
Our checks indicate that this address may not be valid because: 404 Not Found. If this is indeed the case, please notify ()
Download Restriction: no

Bibliographic Info

Paper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2011-538.

as in new window
Length: 48 Pages
Date of creation: Feb 2011
Date of revision:
Handle: RePEc:acb:cbeeco:2011-538

Contact details of provider:
Postal: Canberra, ACT 0200
Phone: +61 2 6125 3807
Fax: +61 2 6125 0744
Email:
Web page: http://rse.anu.edu.au/
More information through EDIRC

Related research

Keywords:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Jean-Charles Rochet & Philippe Chone, 1998. "Ironing, Sweeping, and Multidimensional Screening," Econometrica, Econometric Society, Econometric Society, vol. 66(4), pages 783-826, July.
  2. Arthur Lewbel, 1999. "Semiparametric Qualitative Response Model Estimation with Unknown Heteroskedasticity or Instrumental Variables," Boston College Working Papers in Economics, Boston College Department of Economics 454, Boston College Department of Economics.
  3. Donald J. Brown & Marten H. Wegkamp, 2001. "Weighted Minimum Mean-Square Distance from Independence Estimation," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1288, Cowles Foundation for Research in Economics, Yale University.
  4. Victor Chernozhukov & Han Hong & Elie Tamer, 2007. "Estimation and Confidence Regions for Parameter Sets in Econometric Models," Econometrica, Econometric Society, Econometric Society, vol. 75(5), pages 1243-1284, 09.
  5. Pierre-André Chiappori & Bernard Salanié, 1997. "Testing for Asymmetric Information in Insurance Markets," Working Papers, Centre de Recherche en Economie et Statistique 97-11, Centre de Recherche en Economie et Statistique.
  6. Pedro Carneiro & Karsten T. Hansen & James J. Heckman, 2003. "Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College," NBER Working Papers 9546, National Bureau of Economic Research, Inc.
  7. Matzkin, Rosa L, 1992. "Nonparametric and Distribution-Free Estimation of the Binary Threshold Crossing and the Binary Choice Models," Econometrica, Econometric Society, Econometric Society, vol. 60(2), pages 239-70, March.
  8. Guerre, E. & Perrigne, I. & Vuong, Q., 1995. "Nonparametric Estimation of First-Price Auctions," Papers, Southern California - Department of Economics 9504, Southern California - Department of Economics.
  9. Gaurab Aryal & Isabelle Perrigne & Quang Vuong, 2011. "Nonidentification of Insurance Models with Probability of Accidents," ANU Working Papers in Economics and Econometrics, Australian National University, College of Business and Economics, School of Economics 2011-552, Australian National University, College of Business and Economics, School of Economics.
  10. Emmanuel Guerre & Isabelle Perrigne & Quang Vuong, 2009. "Nonparametric Identification of Risk Aversion in First-Price Auctions Under Exclusion Restrictions," Econometrica, Econometric Society, Econometric Society, vol. 77(4), pages 1193-1227, 07.
  11. Sandra Campo & Emmanuel Guerre & Isabelle Perrigne & Quang Vuong, 2003. "Semiparametric Estimation of First-price Auctions with Risk Averse Bidders," Working Papers, Centre de Recherche en Economie et Statistique 2003-09, Centre de Recherche en Economie et Statistique.
  12. Haile,P.A. & Tamer,E.T., 2000. "Inference with an incomplete model of English auctions," Working papers, Wisconsin Madison - Social Systems 18, Wisconsin Madison - Social Systems.
  13. Athey, Susan & Haile, Philip A., 2007. "Nonparametric Approaches to Auctions," Handbook of Econometrics, Elsevier, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 60 Elsevier.
  14. Heckman, James J., 2001. "Econometrics and empirical economics," Journal of Econometrics, Elsevier, Elsevier, vol. 100(1), pages 3-5, January.
  15. Phillip Leslie, 2004. "Price Discrimination in Broadway Theater," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 520-541, Autumn.
  16. Matzkin, Rosa L., 1993. "Nonparametric identification and estimation of polychotomous choice models," Journal of Econometrics, Elsevier, Elsevier, vol. 58(1-2), pages 137-168, July.
  17. Su, Liangjun & White, Halbert, 2008. "A Nonparametric Hellinger Metric Test For Conditional Independence," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 24(04), pages 829-864, August.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Gaurab Aryal & Isabelle Perrigne & Quang Vuong, 2011. "Nonidentification of Insurance Models with Probability of Accidents," ANU Working Papers in Economics and Econometrics, Australian National University, College of Business and Economics, School of Economics 2011-552, Australian National University, College of Business and Economics, School of Economics.
  2. Xavier d'Haultfoeuille & Philippe Février, 2010. "Identification of a Class of Adverse Selection Models with Contracts Variation," Working Papers, Centre de Recherche en Economie et Statistique 2011-27, Centre de Recherche en Economie et Statistique.
  3. Yao Luo, 2011. "Nonlinear Pricing with Product Customization in Mobile Service Industry," Working Papers, NET Institute 11-28, NET Institute.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:acb:cbeeco:2011-538. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.