Evidence on Adverse Selection: Equilibrium Signaling and Cross-Subsidization in the Insurance Market
The configuration of equilibrium in the market for automobile collision insurance is examined empirically by representing the premium-deductible menu and the demand function as a standard hedonic system. Using contractual data from a representative insurer, the authors estimate a reduced-form hedonic premium equation and the inverse of the marginal bid equation for insurance coverage. The data reveal an equilibrium with adverse selection and market signaling but lead the authors to reject the hypothesis that high risks receive contracts subsidized by low risks. Copyright 1994 by University of Chicago Press.
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- In-Koo Cho & David M. Kreps, 1987.
"Signaling Games and Stable Equilibria,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 102(2), pages 179-221.
- In-Koo Cho & David M. Kreps, 1997. "Signaling Games and Stable Equilibria," Levine's Working Paper Archive 896, David K. Levine.
- Epple, Dennis, 1987. "Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 59-80, February.
- Mark V. Pauly, 1974. "Overinsurance and Public Provision of Insurance: The Roles of Moral Hazard and Adverse Selection," The Quarterly Journal of Economics, Oxford University Press, vol. 88(1), pages 44-62.
- Riley, John G, 1979. "Informational Equilibrium," Econometrica, Econometric Society, vol. 47(2), pages 331-359, March.
- John G. Riley, 1976. "Informational Equilibrium," UCLA Economics Working Papers 071, UCLA Department of Economics.
- Jack Hirschleifer & John G. Riley, 1979. "Uncertainty and Information in Economics," UCLA Economics Working Papers 140, UCLA Department of Economics.
- Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374. Full references (including those not matched with items on IDEAS)
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