How Can Insurance Companies Compete With MutualInsurers? The Role of Commitment
AbstractThe aim of this paper is to analyze the impact of the existence of mutual firms on the behavior of insurance companies and more precisely to study in which situations an insurance company can enter a market controlled by mutual arrangements. Our approach differs from the existing literature as we integrate the investment choices of the insurance company and the fact that, because it commits on a fix contract, it can become insolvent. In such a situation we are able tocharacterize the unique optimal choices of the monopolistic company and the conditions favoringits appearance.
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Date of creation: 2006
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Insurance market; Mutual firms; Commitment; Insolvency;
Other versions of this item:
- Bourlès, Renaud, 2007. "On the Emergence of Private Insurance in Presence of Mutual Agreements," MPRA Paper 5821, University Library of Munich, Germany.
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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- Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
- Raj Chetty, 2006. "A Bound on Risk Aversion Using Labor Supply Elasticities," NBER Working Papers 12067, National Bureau of Economic Research, Inc.
- Hansmann, Henry, 1985. "The Organization of Insurance Companies: Mutual versus Stock," Journal of Law, Economics and Organization, Oxford University Press, vol. 1(1), pages 125-53, Spring.
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