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Public versus Private Insurance System with (and without) Transaction Costs: Optimal Segmentation Policy of an Informed monopolistPublic versus Private Insurance System with (and without) Transaction Costs: Optimal Segmentation Policy of an Informed monopolist

Author

Listed:
  • Yann Braouezec

    (IESEG School of Management (LEM-CNRS))

Abstract

Computer mediated transactions ([Varian, 2010]) allow insurance companies to customize their contracts while transaction costs limits this tendency toward customization. To capture this, we develop a complete-information framework in which it is costly to design a new market segment when the segmentation policy (number and design of segments) is endogenously chosen. Both the case of a private and a public insurer are considered. Without transaction cost, these two insurance systems are equivalent in terms of social welfare and participation. With transaction costs, this equivalence is not anymore true and the analysis of this difference is the subject of this article.

Suggested Citation

  • Yann Braouezec, 2015. "Public versus Private Insurance System with (and without) Transaction Costs: Optimal Segmentation Policy of an Informed monopolistPublic versus Private Insurance System with (and without) Transaction ," Working Papers 2013-ECO-23, IESEG School of Management, revised May 2014.
    • Handle: RePEc:ies:wpaper:e201323
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    References listed on IDEAS

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    More about this item

    Keywords

    Insurance; large economy; participation; direct segmentation; transaction costs; social welfare;
    All these keywords.

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D60 - Microeconomics - - Welfare Economics - - - General

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