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Equilibrium with Monoline and Multiline Structures
[Uncertainty and the welfare economics of medical care]

Author

Listed:
  • Rustam Ibragimov
  • Dwight Jaffee
  • Johan Walden

Abstract

We study a competitive market for risk-sharing, in which risk-tolerant providers of risk protection, who face frictional costs in holding capital, offer coverage over a range of risk classes to risk-averse agents. We distinguish monoline and multiline industry structures and characterize when each structure is optimal. Markets for which the risks are limited in number, asymmetric or correlated will be served by monoline structures, whereas markets characterized by a large number of essentially independent risks will be served by many multiline firms. Our results are consistent with observed structures within insurance, and also have general implications for the financial services industry.

Suggested Citation

  • Rustam Ibragimov & Dwight Jaffee & Johan Walden, 2018. "Equilibrium with Monoline and Multiline Structures [Uncertainty and the welfare economics of medical care]," Review of Finance, European Finance Association, vol. 22(2), pages 595-632.
    • Handle: RePEc:oup:revfin:v:22:y:2018:i:2:p:595-632.
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    References listed on IDEAS

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    More about this item

    Keywords

    Insurance; Financial services; Risk-sharing; Diversification;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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