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Insurance Contracts Designed by Competitive Pooling

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Author Info
P. Dubey ()
J. Geanakoplos
Abstract

We 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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File URL: http://www.sunysb.edu/economics/research/papers/2001/01-09.pdf
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Publisher Info
Paper provided by Stony Brook University, Department of Economics in its series Department of Economics Working Papers with number 01-09.

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Length: 39 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:nys:sunysb:01-09

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Find related papers by JEL classification:
D4 - Microeconomics - - Market Structure and Pricing
D5 - Microeconomics - - General Equilibrium and Disequilibrium
D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

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This page was last updated on 2009-12-13.

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