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Does Signaling Work in Markets for Information Services? An Empirical Investigation for Insurance Intermediaries in Germany

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Author Info
Martina Eckardt () (Witten/Herdecke University)

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Abstract

Insurance intermediation services are information services which exhibit strong information asymmetries. We empirically analyze whether signaling works in the German market for insurance intermediation services. For this a signal must increase service quality and be easily identifiable by consumers so that it pays for intermediaries to spend the related costs. By using OLS and logit estimations we test whether intermediary type, reputational activities and a variety of signaling instruments work as credible signals. Our findings confirm the main hypotheses derived from signaling theory as to the poor working of market forces in markets for information services. Accordingly, public policy regulation is necessary to mitigate the resulting problems.

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File URL: http://www.wiwi.uni-rostock.de/fileadmin/Institute/VWL/VWL-Institut/RePEc/pdf/wp077thuenen.pdf
File Format: application/pdf
File Function: First version, 2007
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Publisher Info
Paper provided by University of Rostock, Institute of Economics, Germany in its series Thuenen-Series of Applied Economic Theory with number 77.

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Length: 32 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:ros:wpaper:77

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Related research
Keywords: signaling; insurance intermediation; information services;

Other versions of this item:

Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Stiglitz, Joseph E., 1989. "Imperfect information in the product market," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 13, pages 769-847 Elsevier. [Downloadable!] (restricted)
  2. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August. [Downloadable!] (restricted)
    Other versions:
  3. Schmalensee, Richard, 1978. "A Model of Advertising and Product Quality," Journal of Political Economy, University of Chicago Press, vol. 86(3), pages 485-503, June. [Downloadable!] (restricted)
  4. Franklin Allen, 1984. "Reputation and Product Quality," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 311-327, Autumn. [Downloadable!] (restricted)
  5. Spence, A Michael, 1977. "Consumer Misperceptions, Product Failure and Producer Liability," Review of Economic Studies, Blackwell Publishing, vol. 44(3), pages 561-72, October. [Downloadable!] (restricted)
  6. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August. [Downloadable!] (restricted)
  7. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law & Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
  8. Ippolito, Pauline M, 1990. "Bonding and Nonbonding Signals of Product Quality," Journal of Business, University of Chicago Press, vol. 63(1), pages 41-60, January. [Downloadable!] (restricted)
  9. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August. [Downloadable!] (restricted)
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  10. Michael Spence, 2002. "Signaling in Retrospect and the Informational Structure of Markets," American Economic Review, American Economic Association, vol. 92(3), pages 434-459, June. [Downloadable!]
    Other versions:
  11. William P. Rogerson, 1986. "Advertising as a Signal When Price Guarantees Quality," Discussion Papers 704, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  12. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August. [Downloadable!] (restricted)
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