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An Evolutionary Analysis of Insurance Markets

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Author Info

  • Ana B. Ania

    ()

  • Thomas Tröger

    ()

  • Wambach

    ()

Abstract

Since the seminal work by Rothschild and Stiglitz on competitive insurance markets under adverse selection the problem of non-existence of equilibrium has puzzled many economists. In this paper we approach this problem from an evo- lutionary point of view. In a dynamic model insurance companies remove loss- making contracts from the market and copy pro t-making ones. Occasionally, they also experiment, adding new contracts or removing current ones arbitrarily. We show that the Rothschild-Stiglitz outcome arises in the long run if it consti- tutes an equilibrium in the static framework, but also if it is not an equilibrium, provided that rms only experiment with contracts in the vicinity of their current portfolio.

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File URL: http://homepage.univie.ac.at/Papers.Econ/RePEc/vie/viennp/vie9808.pdf
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Bibliographic Info

Paper provided by University of Vienna, Department of Economics in its series Vienna Economics Papers with number 9808.

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Date of creation: Aug 1989
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Handle: RePEc:vie:viennp:9808

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Web page: http://www.univie.ac.at/vwl

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Cited by:
  1. Wanda Mimra & Achim Wambach, 2011. "A Game-Theoretic Foundation for the Wilson Equilibrium in Competitive Insurance Markets with Adverse Selection," CESifo Working Paper Series 3412, CESifo Group Munich.

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