Insurance Markets When Firms Are Asymmetrically Informed: A Note
AbstractWe examine welfare effects of the entry of a single well-informed insurance firm into a competitive insurance market. We show that the effect depends on the structure of the market. If competitive insurers rely on the standard self-selection mechanism of a menu of contracts, then the entry of a single well-informed firm which can discriminate costlessly between consumer risk types will increase welfare. In contrast, if consumers do not know their own risk type, then the introduction of a well-informed insurer may reduce welfare.
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Bibliographic InfoPaper provided by Department of Economics, University of Calgary in its series Working Papers with number 2007-18.
Date of creation: 30 Nov 2007
Date of revision: 30 Nov 2007
Find related papers by JEL classification:
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-12-15 (All new papers)
- NEP-COM-2007-12-15 (Industrial Competition)
- NEP-IAS-2007-12-15 (Insurance Economics)
- NEP-MIC-2007-12-15 (Microeconomics)
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.:
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- Crocker, Keith J & Snow, Arthur, 1986. "The Efficiency Effects of Categorical Discrimination in the Insurance Industry," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 321-44, April.
- Pedro Pita Barros, 1993. "Freedom of Services and Competition in Insurance Markets: A Note," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 18(1), pages 93-101, June.
- Georges Dionne & Christian Gourieroux & Charles Vanasse, 2001. "Testing for Evidence of Adverse Selection in the Automobile Insurance Market: A Comment," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 444-473, April.
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