An Evolutionary Analysis of Insurance Markets under Adverse Selection
Since the seminal work by Rothschild and Stiglitz on competitive insurance markets under adverse selection the problem of non-existence of equilibrium hat puzzled many economists. In this paper we approach this problem from an evolutionary point of view. In a dynamic model insurance companies remove lossmaking contracts from the market and copy profit making ones. Occasionally, they also experiment, adding new contracts or removing current ones arbitrarily. We show that the Rothschild-Stiglitz outcome arises in the long run if it cinstitutes an equilibrium in the static framework, but also if it is not an equilibrium, provides that firms only experiment with contracts in the vicinity of their current portfolio.
(This abstract was borrowed from another version of this item.)
When requesting a correction, please mention this item's handle: RePEc:vie:viennp:9801. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paper Administrator)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.