IDEAS home Printed from https://ideas.repec.org/p/rsm/riskun/r07_5.html

Bargaining power and efficiency in insurance contracts

Author

Listed:
  • John Quiggin

    (Risk & Sustainable Management Group, School of Economics, University of Queensland)

  • Robert G. Chambers

    (Dept of Agricultural and Resource Economics, University of Maryland, College Park)

Abstract

Insurance contracts are frequently modelled as principal--agent relationships. Although it is commonly assumed that the principal, in this case the insurer, has complete freedom to design the contract, the problem formulation in much of the principal--agent literature presumes that the contract is constrained-Pareto-efficient. In the present paper, we consider the implications of a richer specification of the choices available to clients. In particular, we consider the entire spectrum of possible power differentials in the contracting relationship between insurers and clients. Our central result is that the agent can exploit information asymmetries to offset the bargaining power of the insurer, but that this process is socially costly.

Suggested Citation

  • John Quiggin & Robert G. Chambers, 2007. "Bargaining power and efficiency in insurance contracts," Risk & Uncertainty Working Papers WP5R07, Risk and Sustainable Management Group, University of Queensland.
    • Handle: RePEc:rsm:riskun:r07_5
    as

    Download full text from publisher

    File URL: http://www.uq.edu.au/rsmg/WP/WPR07_5.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. is not listed on IDEAS
    2. Boonen, Tim J., 2016. "Nash equilibria of Over-The-Counter bargaining for insurance risk redistributions: The role of a regulator," European Journal of Operational Research, Elsevier, vol. 250(3), pages 955-965.
    3. Massimo Guidolin & Giacomo Leonetti & Manuela Pedio, 2025. "Understanding the Factors Driving the Demand of Structured Investment Products," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 45(9), pages 1154-1181, September.
    4. Chi, Yichun & Hu, Tao & Zhao, Zhengtang & Zheng, Jiakun, 2024. "Optimal insurance design under asymmetric Nash bargaining," Insurance: Mathematics and Economics, Elsevier, vol. 119(C), pages 194-209.
    5. Boonen, Tim J. & De Waegenaere, Anja & Norde, Henk, 2017. "Redistribution of longevity risk: The effect of heterogeneous mortality beliefs," Insurance: Mathematics and Economics, Elsevier, vol. 72(C), pages 175-188.
    6. Huang, Rachel J. & Huang, Yi-Chieh & Tzeng, Larry Y., 2013. "Insurance bargaining under ambiguity," Insurance: Mathematics and Economics, Elsevier, vol. 53(3), pages 812-820.
    7. Hu, Duni & Chen, Shou & Wang, Hailong, 2018. "Robust reinsurance contracts with uncertainty about jump risk," European Journal of Operational Research, Elsevier, vol. 266(3), pages 1175-1188.
    8. Yanbin Chen & Pu Chen & Yumei Guo & Sanxi Li & Dongmin Yao, 2019. "Bargaining to Design Contracts under Moral Hazard," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 175(4), pages 714-735.
    9. J François Outreville, 2010. "The Geneva Risk and Insurance Review 2009: In Quest of Behavioural Insurance," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 35(3), pages 484-497, July.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rsm:riskun:r07_5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: David Adamson The email address of this maintainer does not seem to be valid anymore. Please ask David Adamson to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/rsmuqau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.