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Facilitating Consumer Learning in Insurance Markets: What Are the Welfare Effects?

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  • Johan N. M. Lagerlöf
  • Christoph Schottmüller

Abstract

We model a monopoly insurance market in which consumers can learn their accident risks at a cost c. We then examine the welfare effects of a policy that reduces c. If c is sufficiently small (c c*, marginally reducing c hurts the insurer and weakly benefits the consumer. Finally, a reduction in c that is successful, meaning that the consumer gathers information after the reduction but not before it, can hurt both parties.

Suggested Citation

  • Johan N. M. Lagerlöf & Christoph Schottmüller, 2018. "Facilitating Consumer Learning in Insurance Markets: What Are the Welfare Effects?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 120(2), pages 465-502, April.
    • Handle: RePEc:bla:scandj:v:120:y:2018:i:2:p:465-502
    DOI: 10.1111/sjoe.12231
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    Cited by:

    1. Johan N.M. Lagerlöf & Christoph Schotmüller, 2013. "Monopoly Insurance with Endogenous Information," Discussion Papers 13-15, University of Copenhagen. Department of Economics.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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