Insurance Contracts Designed by Competitive Pooling
AbstractWe build a model of competitive pooling and show how insurance contracts emerge in equilibrium, designed by the invisible hand of perfect competition. When pools are exclusive, we obtain a unique separating equilibrium. When pools are not exclusive but seniority is recognized, we obtain a different unique equilibrium: the pivotal primary-secondary equilibrium. Here reliable and unreliable households take out a common primary insurance up to its maximum limit, and then unreliable households take out further secondary insurance.
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Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1315.
Length: 38 pages
Date of creation: Aug 2001
Date of revision:
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-11-27 (All new papers)
- NEP-ENT-2001-11-27 (Entrepreneurship)
- NEP-IAS-2001-11-27 (Insurance Economics)
- NEP-NET-2001-11-27 (Network Economics)
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