Costly risk verification without commitment in competitive insurance markets
This paper analyzes the equilibrium of an insurance market where applicants for insurance have a duty of good faith when they reveal private information about their risk type. Insurers can, at some cost, verify the type of insureds who file a claim and they are allowed to retroactively void the insurance contract if it is established that the policyholder has misrepresented his risk when the contract was taken out. However, insurers cannot precommit to their risk verification strategy. The paper analyzes the relationship between second-best Pareto-optimality and the insurance market equilibrium in a game theoretic framework. It characterizes the contracts offered at equilibrium, the individuals' contract choice as well as the conditions under which an equilibrium exists.
(This abstract was borrowed from another version of this item.)
|Date of creation:||2002|
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- Dionne, G. & St-Michel, P. & Gibbens, A., 1993. "An Economic Analysis of Insurance Fraud," Cahiers de recherche 93010, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Picard, Pierre, 1994. "Auditing claims in insurance market with fraud : the credibility issue," CEPREMAP Working Papers (Couverture Orange) 9420, CEPREMAP.
- Jörg Schiller, 2006.
"The Impact of Insurance Fraud Detection Systems,"
Journal of Risk & Insurance,
The American Risk and Insurance Association, vol. 73(3), pages 421-438.
- Schiller, Jörg, 2002. "The impact of insurance fraud detection systems," Working Papers on Risk and Insurance 8, University of Hamburg, Institute for Risk and Insurance.
- Jörg Schiller, 2003. "The Impact of Insurance Fraud Detection Systems," Microeconomics 0310001, EconWPA.
- Joerg Schiller, 2003. "The Impact of Insurance Fraud Detection Systems," Microeconomics 0309003, EconWPA, revised 02 Oct 2003.
- Maskin, Eric & Tirole, Jean, 2001. "Markov Perfect Equilibrium: I. Observable Actions," Journal of Economic Theory, Elsevier, vol. 100(2), pages 191-219, October.
- Eric Maskin & Jean Tirole, 1997. "Markov Perfect Equilibrium, I: Observable Actions," Harvard Institute of Economic Research Working Papers 1799, Harvard - Institute of Economic Research.
- Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, September.
- Crocker, Keith J. & Snow, Arthur, 1985. "The efficiency of competitive equilibria in insurance markets with asymmetric information," Journal of Public Economics, Elsevier, vol. 26(2), pages 207-219, March.
- Hellwig, Martin, 1987. "Some recent developments in the theory of competition in markets with adverse selection ," European Economic Review, Elsevier, vol. 31(1-2), pages 319-325.
- Hellwig,Martin, 1986. "Some recent developments in the theory of competition in markets with adverse selection," Discussion Paper Serie A 82, University of Bonn, Germany.
- M. Martin Boyer, 2004. "Overcompensation as a Partial Solution to Commitment and Renegotiation Problems: The Case of "Ex Post" Moral Hazard," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(4), pages 559-582.
- Picard, Pierre, 1996. "Auditing claims in the insurance market with fraud: The credibility issue," Journal of Public Economics, Elsevier, vol. 63(1), pages 27-56, December.
- Spence, Michael, 1978. "Product differentiation and performance in insurance markets," Journal of Public Economics, Elsevier, vol. 10(3), pages 427-447, December.
- A. Dixit, 1999. "Adverse Selection and Insurance with Uberrima Fides," Princeton Economic Theory Papers 99f5, Economics Department, Princeton University.
- Khalil, Fahad & Parigi, Bruno M, 1998. "Loan Size as a Commitment Device," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 135-150, February. Full references (including those not matched with items on IDEAS)
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