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Insurance Market Games: Scale Effects and Public Policy

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Author Info
Michael R. Powers (Temple University)
Martin Shubik () (Cowles Foundation, Yale University)
Shuntian Yao (Victoria University of Wellington)

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Abstract

We propose a game-theoretic model to study various effects of scale in an insurance market. After reviewing a simple static model, we present a one-period game in which both the buyers and sellers of insurance make strategic bids, and show that, under reasonably broad conditions, market equilibrium exists. For a special case, we then consider how both the price and quantity of insurance, as well as other quantities of interest to public policy decision makers, are affected by the number of insurance firms, the number of customers, and the total amount of capital provided by investors.

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File URL: http://cowles.econ.yale.edu/P/cd/d10b/d1076.pdf
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Publisher Info
Paper provided by Cowles Foundation, Yale University in its series Cowles Foundation Discussion Papers with number 1076.

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Length: 26 pages
Date of creation: Aug 1994
Date of revision:
Handle: RePEc:cwl:cwldpp:1076

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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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Related research
Keywords: Insurance market games; scale effects; public policy;

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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.:
  1. Cummins, J. David & Weiss, Mary A., 1993. "Measuring cost efficiency in the property-liability insurance industry," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 463-481, April. [Downloadable!] (restricted)
  2. Schlesinger, Harris, 1984. "Two-person insurance negotiation," Insurance: Mathematics and Economics, Elsevier, vol. 3(3), pages 147-149, July. [Downloadable!] (restricted)
  3. J. David Cummins & Jack VanDerhei, 1979. "A Note on the Relative Efficiency of Property-Liability Insurance Distribution Systems," Bell Journal of Economics, The RAND Corporation, vol. 10(2), pages 709-719, Autumn. [Downloadable!] (restricted)
  4. Sherrill Shaffer, 1989. "Pooling intensifies joint failure risk," Working Papers 89-1, Federal Reserve Bank of Philadelphia.
  5. Kunreuther, Howard & Pauly, Mark, 1985. "Market equilibrium with private knowledge : An insurance example," Journal of Public Economics, Elsevier, vol. 26(3), pages 269-288, April. [Downloadable!] (restricted)
  6. Paul L. Joskow, 1973. "Cartels, Competition and Regulation in the Property-Liability Insurance Industry," Bell Journal of Economics, The RAND Corporation, vol. 4(2), pages 375-427, Autumn. [Downloadable!] (restricted)
  7. Michael R. Powers & Martin Shubik & Shuntian Yao, 1994. "Insurance Market Games: Scale Effects and Public Policy," Cowles Foundation Discussion Papers 1076, Cowles Foundation, Yale University. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Nicholas Economides, 2003. "A Parimutuel Market Microstructure for Contingent Claims," Working Papers 03-18, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
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  2. Jeffrey Lange & Nicholas Economides, 2001. "A Parimutuel Market Microstructure for Contingent Claims Trading," Working Papers 01-13, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
  3. Michael Powers & Martin Shubik & Shun Yao, 1998. "Insurance market games: Scale effects and public policy," Journal of Economics, Springer, vol. 67(2), pages 109-134, June. [Downloadable!] (restricted)
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