Iris Kesternich () (Ludwig Maximilian Universität München) Heiner Schumacher () (Goethe Universität Frankfurt)
Abstract
We analyze the use of information in a repeated oligopolistic insurance market. To sustain collusion, insurance companies might refrain from changing their pricing schedules even if new information about risks becomes available. We therefore provide an explanation for the existence of "unused observables" that is information which a) insurance companies collect or could collect, b) is correlated with the risk experience, but c) is not used by companies to set prices. Furthermore, the existence of bulk discounts becomes rationalizable. These results also obtain if we include communication among companies and market entry to our framework.
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Publisher Info
Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number
280.