Multidimensional screening in a monopolistic insurance market
In this paper, we consider a population of ndividuals who differ in two dimensions: their risk type (expected loss) and their risk aversion. We solve for the profit maximizing menu of contracts that a monopolistic insurer puts out on the market. First, we …nd that it is never optimal to fully separate all the types. Second, if heterogeneity in risk aversion is sufficiently high, then some high-risk individuals (the risk-tolerant ones) will obtain lower coverage than some low-risk individuals (the risk-averse ones). Third, we show that when the average man and woman differ only in risk aversion, gender discrimination may lead to a Pareto improvement.
|Date of creation:||02 Nov 2011|
|Date of revision:|
|Contact details of provider:|| Postal: NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway|
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