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The Gains of Ignoring Risk: Insurance with Better Informed Principals

Author

Listed:
  • Laura Abrardi
  • Luca Colombo

    () (Università Cattolica del Sacro Cuore
    Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)

  • Piero Tedeschi

Abstract

We study a competitive insurance market in which insurers have an imperfect informative advantage over policyholders. We show that the presence of insurers privately and heterogeneously informed about risk can explain the concentration levels, the persistent profitability and the pooling of risk observed in some insurance markets. Furthermore, we find that a lower market concentration may entail an increase in insurance premia

Suggested Citation

  • Laura Abrardi & Luca Colombo & Piero Tedeschi, 2019. "The Gains of Ignoring Risk: Insurance with Better Informed Principals," DISCE - Working Papers del Dipartimento di Economia e Finanza def084, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  • Handle: RePEc:ctc:serie1:def084
    as

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    File URL: http://dipartimenti.unicatt.it/economia-finanza-def084.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Insurance markets; Asymmetric information; Risk assessment; Market concentration.;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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