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Endogenous Information and Self-Insurance in Insurance Markets : a Welfare Analysis

Author

Listed:
  • Francesca Barigozzi

    (UNIBO - Alma Mater Studiorum Università di Bologna = University of Bologna)

  • Dominique Henriet

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, IDEP - Institut d'Économie Publique - GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

We develop a model where consumers do not have ex-ante private information on their risk but can decide to acquire such information before insurance policy purchase. Adverse selection can arise endogenouslyin the insurance market. We focus on the case where information has decision-making value: information allows consumers to optimally choose a self-insurance action. We analyze insurance market response to endogenous information and consumers'incentive to search for such information. Welfare costs caused by the lack of coverage against the risk to be a high risk are analyzed. The case of genetic testing serves as an illustration.

Suggested Citation

  • Francesca Barigozzi & Dominique Henriet, 2006. "Endogenous Information and Self-Insurance in Insurance Markets : a Welfare Analysis," Working Papers halshs-00411337, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00411337
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00411337
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    References listed on IDEAS

    as
    1. Tabarrok, Alexander, 1994. "Genetic testing: An economic and contractarian analysis," Journal of Health Economics, Elsevier, vol. 13(1), pages 75-91, March.
    2. Michael Hoy & Michael Ruse, 2005. "Regulating Genetic Information in Insurance Markets," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 8(2), pages 211-237, September.
    3. Cochrane, John H, 1995. "Time-Consistent Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 445-473, June.
    4. Doherty, Neil A. & Thistle, Paul D., 1996. "Adverse selection with endogenous information in insurance markets," Journal of Public Economics, Elsevier, vol. 63(1), pages 83-102, December.
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