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Raising capital in an insurance oligopoly market

Author

Listed:
  • Julien Hardelin

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris, AgroParisTech)

  • Sabine Lemoyne de Forges

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris, AgroParisTech)

Abstract

We consider an oligopoly of firms that compete on price. Firms produce a non-stochastic output, insurance coverage, which is sold before the true cost is known. They behave as if they were risk-averse for a standard reason of costly external finance. The model consists in a two-stage game. At stage 1, each firm chooses its internal capital level. At stage 2, firms compete on price. We characterize the conditions for Nash equilibria and analyze the strategic impact of capital choice on the market. We discuss the model with regard to insurance industry specificity and regulation.

Suggested Citation

  • Julien Hardelin & Sabine Lemoyne de Forges, 2009. "Raising capital in an insurance oligopoly market," Working Papers hal-00417573, HAL.
    • Handle: RePEc:hal:wpaper:hal-00417573
    Note: View the original document on HAL open archive server: https://hal.science/hal-00417573
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    References listed on IDEAS

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    1. Mattias K. Polborn, 1998. "A Model of an Oligopoly in an Insurance Market," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 23(1), pages 41-48, June.
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    3. Zanjani, George, 2002. "Pricing and capital allocation in catastrophe insurance," Journal of Financial Economics, Elsevier, vol. 65(2), pages 283-305, August.
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    12. Gollier, Christian, 2007. "The Determinants of the Insurance Demand by Firms," IDEI Working Papers 468, Institut d'Économie Industrielle (IDEI), Toulouse.
    13. Ray Rees & Hugh Gravelle & Achim Wambach, 1999. "Regulation of Insurance Markets," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 24(1), pages 55-68, June.
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    Cited by:

    1. Sebastian Schlütter, 2019. "Optimal taxation in non-life insurance markets," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 44(1), pages 1-26, March.
    2. Sebastian Schlütter, 2019. "Optimal taxation in non-life insurance markets," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 44(1), pages 1-26, March.
    3. Dutang, Christophe & Albrecher, Hansjoerg & Loisel, Stéphane, 2013. "Competition among non-life insurers under solvency constraints: A game-theoretic approach," European Journal of Operational Research, Elsevier, vol. 231(3), pages 702-711.
    4. Sabine Lemoyne de Forges & Ruben Bibas & Stéphane Hallegatte, 2001. "A dynamic model of extreme risk coverage : Resilience and e fficiency in the global reinsurance market," CIRED Working Papers halshs-00800460, HAL.
    5. Radoslav Raykov, 2014. "Uncertain Costs and Vertical Differentiation in an Insurance Duopoly," Staff Working Papers 14-14, Bank of Canada.
    6. repec:hal:wpaper:hal-00746245 is not listed on IDEAS
    7. Jean-François Outreville, 2014. "The Meaning of Risk? Insights from The Geneva Risk and Insurance Review," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 39(4), pages 768-781, October.

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