IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Strategic Price Discrimination in Compulsory Insurance Markets

  • Luigi Buzzacchi


  • Tommaso Valletti


This paper considers price discrimination when competing firms do not observe a customer’s type but only some other variable correlated to it. This is a typical situation in many insurance markets—such as motor insurance—where it is also often the case that insurance is compulsory. We characterise the equilibria and their welfare properties under various price regimes. We show that discrimination based on immutable characteristics such as gender is a dominant strategy, either when firms offer policies at a fixed price or when they charge according to some consumption variable that is correlated to costs. In the latter case, gender discrimination can be an outcome of strategic interaction alone in situations where it would not be adopted by a monopolist. Strategic price discrimination may also increase cross subsidies between types, contrary to expectations. Copyright The Geneva Association 2005

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Springer in its journal THE GENEVA RISK AND INSURANCE REVIEW.

Volume (Year): 30 (2005)
Issue (Month): 1 (June)
Pages: 71-97

in new window

Handle: RePEc:kap:geneva:v:30:y:2005:i:1:p:71-97
Contact details of provider: Web page:

References listed on IDEAS
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.:

as in new window
  1. Kavalec, Chris & Woods, James, 1999. "Toward marginal cost pricing of accident risk: the energy, travel, and welfare impacts of pay-at-the-pump auto insurance," Energy Policy, Elsevier, vol. 27(6), pages 331-342, June.
  2. Hoy, Michael, 1989. "The value of screening mechanisms under alternative insurance possibilities," Journal of Public Economics, Elsevier, vol. 39(2), pages 177-206, July.
  3. Bond, Eric W & Crocker, Keith J, 1991. "Smoking, Skydiving, and Knitting: The Endogenous Categorization of Risks in Insurance Markets with Asymmetric Information," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 177-200, February.
  4. Crocker, Keith J & Snow, Arthur, 1986. "The Efficiency Effects of Categorical Discrimination in the Insurance Industry," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 321-44, April.
  5. Ana B. Ania & Thomas Tröger & Wambach, 1989. "An Evolutionary Analysis of Insurance Markets," Vienna Economics Papers 9808, University of Vienna, Department of Economics.
  6. Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
  7. Schmalensee, Richard, 1984. "Imperfect Information and the Equitability of Competitive Prices," The Quarterly Journal of Economics, MIT Press, vol. 99(3), pages 441-60, August.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:kap:geneva:v:30:y:2005:i:1:p:71-97. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.