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Complementarity and Substituability in Multiple-Risk Insurance Markets

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  • Koehl, Pierre-Francois
  • Villeneuve, Bertrand

Abstract

We study imperfect competition between insurers in a multiple-risk environment. In the absence of asymmetric information, equilibria are efficient, and we determine the degrees of specialization under which the specialized insurers are able or unable to capture the surplus. We show in contrast that under adverse selection, specialization systematically prevents second-best efficiency. Concluding on the role of our notions of strategic complementarity/substitutability on the tradeoff between efficiency and fairness of the allocation, we give indications on the desirable structure of the insurance industry.

Suggested Citation

  • Koehl, Pierre-Francois & Villeneuve, Bertrand, 2001. "Complementarity and Substituability in Multiple-Risk Insurance Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(1), pages 245-266, February.
    • Handle: RePEc:ier:iecrev:v:42:y:2001:i:1:p:245-66
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    Cited by:

    1. Pierre Picard, 2020. "Splitting Risks in Insurance Markets With Adverse Selection," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 87(4), pages 997-1033, December.
    2. Georges Dionne & Nathalie Fombaron & Wanda Mimra, 2025. "Adverse Selection in Insurance," Springer Books, in: Georges Dionne (ed.), Handbook of Insurance, edition 0, pages 165-221, Springer.
    3. repec:dau:papers:123456789/5370 is not listed on IDEAS
    4. Dionne, Georges & Fombaron, Nathalie & Doherty, Neil, 2012. "Adverse selection in insurance contracting," Working Papers 12-8, HEC Montreal, Canada Research Chair in Risk Management.
    5. Benjamin Davies & Richard Watt, 2017. "Bundling and Insurance of Independent Risks," Working Papers in Economics 17/05, University of Canterbury, Department of Economics and Finance.

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