Why Is Automobile Insurance in Philadelphia So Damn Expensive?
The authors document and attempt to explain the observation that automobile insurance premiums vary dramatically across cities. The authors argue that high premiums can be attributed, at least in part, to large numbers of uninsured motorists in some markets, while uninsured motorists can be attributed to high premiums. The authors construct a simple noncooperative equilibrium model that can generate inefficient equilibria with uninsured drivers and high, yet actuarially fair, premiums. For certain parameterizations, an efficient full-insurance equilibrium and inefficient high-price equilibria with uninsured drivers exist simultaneously, helping to explain price variability across otherwise similar cities. Policy implications are discussed. Copyright 1992 by American Economic Association.
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Volume (Year): 82 (1992)
Issue (Month): 4 (September)
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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.:
- Smith, Eric & Wright, Randall, 1992.
"Why Is Automobile Insurance in Philadelphia So Damn Expensive?,"
American Economic Review,
American Economic Association, vol. 82(4), pages 756-72, September.
- Eric Smith & Randall Wright, 1991. "Why is automobile insurance in Philadelphia so damn expensive?," Staff Report 139, Federal Reserve Bank of Minneapolis.
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