Contracts and Insurance Group Formation by Myopic Players
AbstractThis paper employs a cooperative approach to insurance group formation problems.The insurance group formation is analyzed in terms of stability with respect to one-person deviations.Depending on the exact contractual setting, three stability concepts are proposed: individual, contractual and compensation stability.When we apply our general framework to the standard insurance setting of Rothschild and Stiglitz (1976), we find that, in each type of contractual setting, there are stable individually rational pooling outcomes while, on the contrary, individually rational separating outcomes are not stable.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2005-89.
Date of creation: 2005
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stability; contracts; group formation;
Find related papers by JEL classification:
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
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