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Adverse selection, repeated insurance contracts and announcement strategy


  • DIONNE, Georges
  • LASSERRE, Pierre


In this note, we present a strategy which relies on multi-period contracts and on a self-selection mechanism which induces the insured to announce his true risk in the first period, thus eliminating inefficiency due to adverse selection.
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Suggested Citation

  • DIONNE, Georges & LASSERRE, Pierre, 1985. "Adverse selection, repeated insurance contracts and announcement strategy," CORE Discussion Papers RP 658, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvrp:658 Note: In : Review of Economic Studies, 52, 719-723, 1985

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    References listed on IDEAS

    1. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
    2. Osborne, Martin J. & Pitchik, Carolyn, 1983. "Profit-sharing in a collusive industry," European Economic Review, Elsevier, vol. 22(1), pages 59-74, June.
    3. Green, Edward J., 1980. "Noncooperative price taking in large dynamic markets," Journal of Economic Theory, Elsevier, vol. 22(2), pages 155-182, April.
    4. W. Bentley MacLeod, 1984. "On the Effects of Sunk Costs," Working Papers 555, Queen's University, Department of Economics.
    5. Roth, Alvin E & Murnighan, J Keith, 1982. "The Role of Information in Bargaining: An Experimental Study," Econometrica, Econometric Society, vol. 50(5), pages 1123-1142, September.
    6. Michael Spence, 1978. "Tacit Co-ordination and Imperfect Information," Canadian Journal of Economics, Canadian Economics Association, vol. 11(3), pages 490-505, August.
    7. Roth, Alvin E & Schoumaker, Francoise, 1983. "Expectations and Reputations in Bargaining: An Experimental Study," American Economic Review, American Economic Association, vol. 73(3), pages 362-372, June.
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    Cited by:

    1. Cowling, Marc, 2010. "The role of loan guarantee schemes in alleviating credit rationing in the UK," Journal of Financial Stability, Elsevier, vol. 6(1), pages 36-44, April.
    2. Hansen, Bodil O. & Keiding, Hans, 2002. "Alternative health insurance schemes: a welfare comparison," Journal of Health Economics, Elsevier, vol. 21(5), pages 739-756, September.
    3. Dionne, G. & Doherty, N., 1991. "Adverse Selection In Insurance Markets: A Selective Survey," Cahiers de recherche 9105, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    4. Alma Cohen & Liran Einav, 2007. "Estimating Risk Preferences from Deductible Choice," American Economic Review, American Economic Association, vol. 97(3), pages 745-788, June.
    5. Hyojoung Kim & Doyoung Kim & Subin Im & James W. Hardin, 2009. "Evidence of Asymmetric Information in the Automobile Insurance Market: Dichotomous Versus Multinomial Measurement of Insurance Coverage," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(2), pages 343-366.
    6. Dionne, Georges, 1998. "La mesure empirique des problèmes d’information," L'Actualité Economique, Société Canadienne de Science Economique, vol. 74(4), pages 585-606, décembre.
    7. Bar-Isaac, Heski & Cuñat, Alejandro, 2005. "Long-term debt and hidden borrowing," LSE Research Online Documents on Economics 24661, London School of Economics and Political Science, LSE Library.
    8. Alma Cohen & Peter Siegelman, 2010. "Testing for Adverse Selection in Insurance Markets," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(1), pages 39-84.
    9. Dionne, Georges & Michaud, Pierre-Carl & Pinquet, Jean, 2013. "A review of recent theoretical and empirical analyses of asymmetric information in road safety and automobile insurance," Research in Transportation Economics, Elsevier, vol. 43(1), pages 85-97.
    10. Dionne, Georges & Harrington, Scott, 2017. "Insurance and Insurance Markets," Working Papers 17-2, HEC Montreal, Canada Research Chair in Risk Management.
    11. Ma, Ben-jiang & Qiu, Chun-guang & Bi, Wen-jie, 2015. "An insurance contract with a low compensation period under adverse selection," Information Economics and Policy, Elsevier, vol. 31(C), pages 67-74.
    12. Larry A. Cox & Yanling Ge, 2004. "Temporal Profitability and Pricing of Long-Term Care Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(4), pages 677-705.
    13. Alma Cohen, 2012. "Asymmetric Learning in Repeated Contracting: An Empirical Study," The Review of Economics and Statistics, MIT Press, vol. 94(2), pages 419-432, May.
    14. Garcia, René, 1986. "La théorie économique de l’information : exposé synthétique de la littérature," L'Actualité Economique, Société Canadienne de Science Economique, vol. 62(1), pages 88-109, mars.
    15. repec:dau:papers:123456789/6467 is not listed on IDEAS
    16. Georges Dionne, 2012. "The Empirical Measure of Information Problems with Emphasis on Insurance Fraud and Dynamic Data," Cahiers de recherche 1233, CIRPEE.
    17. Maarten C.W. Janssen & Vladimir A. Karamychev, 2001. "Dynamic Insurance and Adverse Selection," Tinbergen Institute Discussion Papers 01-106/1, Tinbergen Institute.
    18. repec:ebl:ecbull:v:4:y:2008:i:18:p:1-8 is not listed on IDEAS
    19. Jean Pinquet & Georges Dionne & Charles Vanasse & Mathieu Maurice, 2007. "Point-record incentives, asymmetric information and dynamic data," Working Papers hal-00243056, HAL.
    20. Tim Friehe, 2008. "Insurance, Pooling, and Resistance to Reform: The Case of Individual Uncertainty," Economics Bulletin, AccessEcon, vol. 4(18), pages 1-8.
    21. Georges Dionne & Nathalie Fombaron & Neil Doherty, 2012. "Adverse Selection in Insurance Contracting," Cahiers de recherche 1231, CIRPEE.
    22. Michael Ludkovski & Virginia R. Young, 2010. ""Ex Post" Moral Hazard and Bayesian Learning in Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(4), pages 829-856.
    23. repec:oup:rcorpf:v:3:y:2014:i:1-2:p:87-122. is not listed on IDEAS
    24. repec:bla:jrinsu:v:84:y:2017:i:4:p:1269-1293 is not listed on IDEAS

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