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Insurance, Transaction Costs, and Market Segmentation When There is No Adverse Selection

Author

Listed:
  • Yann Braouezec

    (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

Abstract

Computer mediated transactions allow insurance companies to customize their contracts, while transaction costs limit this tendency toward customization. To capture this phenomenon, we develop a complete-information framework in which it is costly to design a new market segment when the segmentation policy (number and design of segments) is endogenously chosen. Both the case of a private and a public insurer are considered. Without transaction costs, these two insurance systems are equivalent in terms of social welfare and participation. With transaction costs, this equivalence is no longer present, and the analysis of this difference is the subject of this article.

Suggested Citation

  • Yann Braouezec, 2013. "Insurance, Transaction Costs, and Market Segmentation When There is No Adverse Selection," Post-Print hal-01914212, HAL.
    • Handle: RePEc:hal:journl:hal-01914212
    DOI: 10.2139/ssrn.2362985
    as

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