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Linear Prices Equilibria and Nonexclusive Insurance Market

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  • Frédéric Loss

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique, CNAM Paris - Centre d'enseignement Cnam Paris - CNAM - Conservatoire National des Arts et Métiers [CNAM] - HESAM - HESAM Université - Communauté d'universités et d'établissements Hautes écoles Sorbonne Arts et métiers université)

  • Gwanaël Piaser

    (IPAG - Business School)

Abstract

We consider a competitive insurance market in which agents can privately enter into multicontractual insurance relationships and undertake hidden actions. We study the existence of linear equilibria when insurance companies do not have any restriction on their pricing rules. We provide conditions under which a linear equilibrium exists. We show that two different types of linear equilibria could exist: A first one in which insurance companies make zero expected profits, and a second one in which they make strictly positive expected profits. We also analyze the welfare properties of the linear equilibria. We show that they are not always second best Pareto optimal.

Suggested Citation

  • Frédéric Loss & Gwanaël Piaser, 2013. "Linear Prices Equilibria and Nonexclusive Insurance Market," Working Papers hal-00870113, HAL.
  • Handle: RePEc:hal:wpaper:hal-00870113
    Note: View the original document on HAL open archive server: https://hal.science/hal-00870113
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    References listed on IDEAS

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    Cited by:

    1. Giuseppe Bertola & Winfried Koeniger, 2015. "Hidden insurance in a moral-hazard economy," RAND Journal of Economics, RAND Corporation, vol. 46(4), pages 777-790, October.

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    Keywords

    Common Agency; Insurance; Moral Hazard; Perfect Competition; Linear Prices Equilibria;
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