Multidimensional screening in a monopolistic insurance market
AbstractIn this paper, we consider a population of individuals who differ in two dimensions: their risk type (expected loss) and their risk aversion. We solve for the profit maximizing menu of contracts that a monopolistic insurer puts out on the market. First, we find that it is never optimal to fully separate all the types. Second, if heterogeneity in risk aversion is sufficiently high, then some high-risk individuals (the risk-tolerant ones) will obtain lower coverage than some low-risk individuals (the risk-averse ones). Third, we show that when the average man and woman differ only in risk aversion, gender discrimination may lead to a Pareto improvement.
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.
Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2011056.
Date of creation: 07 Dec 2011
Date of revision:
Contact details of provider:
Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)
Fax: +32 10474304
Web page: http://www.uclouvain.be/core
More information through EDIRC
insurance markets; asymmetric information; screening; gender discrimination; positive correlation test;
Other versions of this item:
- Pau Olivella & Fred Schroyen, 2012. "Multidimensional Screening in a Monopolistic Insurance Market," Working Papers 619, Barcelona Graduate School of Economics.
- Olivella, Pau & Schroyen, Fred, 2011. "Multidimensional screening in a monopolistic insurance market," Discussion Paper Series in Economics 19/2011, Department of Economics, Norwegian School of Economics.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
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.:
- Alma Cohen & Peter Siegelman, 2010.
"Testing for Adverse Selection in Insurance Markets,"
Journal of Risk & Insurance,
The American Risk and Insurance Association, vol. 77(1), pages 39-84.
- Alma Cohen & Peter Siegelman, 2009. "Testing for Adverse Selection in Insurance Markets," NBER Working Papers 15586, National Bureau of Economic Research, Inc.
- Tomas Philipson & John Cawley, 1999.
"An Empirical Examination of Information Barriers to Trade in Insurance,"
American Economic Review,
American Economic Association, vol. 89(4), pages 827-846, September.
- John Cawley & Tomas Philipson, 1997. "An Empirical Examination of Information Barriers to Trade inInsurance," University of Chicago - George G. Stigler Center for Study of Economy and State 132, Chicago - Center for Study of Economy and State.
- John Cawley & Tomas Philipson, 1996. "An Empirical Examination of Information Barriers to Trade in Insurance," NBER Working Papers 5669, National Bureau of Economic Research, Inc.
- Bertrand VILLENEUVE, 2003.
"Concurrence et antisélection multidimensionnelle en assurance,"
Annales d'Economie et de Statistique,
ENSAE, issue 69, pages 119-142.
- Villeneuve, Bertrand, 2003. "Concurrence et antisélection multidimensionnelle en assurance," Economics Papers from University Paris Dauphine 123456789/5370, Paris Dauphine University.
- Jullien, Bruno & Salanié, Bernard & Salanié, François, 2001.
"Screening Risk-Averse Agents Under Moral Hazard,"
IDEI Working Papers
131, Institut d'Économie Industrielle (IDEI), Toulouse.
- Jullien, Bruno & Salanié, Bernard & Salanié, François, 2001. "Screening Risk Averse Agents Under Moral Hazard," CEPR Discussion Papers 3076, C.E.P.R. Discussion Papers.
- Bruno Jullien & Bernard Salanié & François Salanié, 2000. "Screening Risk-Averse Agents Under Moral Hazard," Working Papers 2000-41, Centre de Recherche en Economie et Statistique.
- Kimball, Miles S & Sahm, Claudia R & Shapiro, Matthew D, 2008.
"Imputing Risk Tolerance From Survey Responses,"
Journal of the American Statistical Association,
American Statistical Association, vol. 103(483), pages 1028-1038.
- Nick Netzer & Florian Scheuer, 2010.
"Competitive screening in insurance markets with endogenous wealth heterogeneity,"
Springer, vol. 44(2), pages 187-211, August.
- Nick Netzer & Florian Scheuer, 2009. "Competitive Screening in Insurance Markets with Endogenous Wealth Heterogeneity," SOI - Working Papers 0907, Socioeconomic Institute - University of Zurich, revised Jun 2009.
- Philippe, DE DONDER & Jean, HINDRIKS, 2006.
"Equilibrium Social Insurance with Policy-Motivated Parties,"
Discussion Papers (ECON - DÃ©partement des Sciences Economiques)
2006018, Université catholique de Louvain, Département des Sciences Economiques.
- De Donder, Philippe & Hindriks, Jean, 2007. "Equilibrium social insurance with policy-motivated parties," European Journal of Political Economy, Elsevier, vol. 23(3), pages 624-640, September.
- DE DONDER, Philippe & HINDRIKS, Jean, 2006. "Equilibrium social insurance with policy-motivated parties," CORE Discussion Papers 2006033, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Pau Olivella & Marcos Vera-Hernández, 2006. "Testing for Asymmetric Information in Private Health Insurance," Working Papers 246, Barcelona Graduate School of Economics.
- Cutler, David & McGarry, Kathleen & Finkelstein, Amy, 2008. "Preference Heterogeneity and Insurance Markets: Explaining a Puzzle of Insurance," Scholarly Articles 2640581, Harvard University Department of Economics.
- Eckel, Catherine C. & Grossman, Philip J., 2008.
"Men, Women and Risk Aversion: Experimental Evidence,"
Handbook of Experimental Economics Results,
- David McCarthy & Olivia S. Mitchell, 2003. "International Adverse Selection in Life Insurance and Annuities," NBER Working Papers 9975, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alain GILLIS).
If references are entirely missing, you can add them using this form.