Arnott and Stiglitz (1993) have argued that, in competitive insurance markets with moral hazard, equilibrium may entail firms offering latent policies--policies that are not bought in equilibrium but are kept in place to deter entry. This paper provides an extended example of such an equilibrium, which not only proces that latent policies can be present in equilibrium but also elucidates the mechanism which makes them potentially effective in deterring entry.
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Length: 29 pages Date of creation: May 1996 Date of revision: Handle: RePEc:boc:bocoec:353
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Find related papers by JEL classification: D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
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.:
Bizer, David S & DeMarzo, Peter M, 1992.
"Sequential Banking,"
Journal of Political Economy,
University of Chicago Press, vol. 100(1), pages 41-61, February.
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