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When prices hardly matter: Incomplete insurance contracts and markets for repair goods

  • Martin Nell

    (University of Hamburg)

  • Andreas Richter

    (Illinois State University)

  • Jörg Schiller

    (WHU – Otto Beisheim Graduate School of Management)

This paper looks at markets characterized by the fact that the demand side is insured. In these markets a consumer purchases a good to compensate consequences of unfavorable events, such as an accident or an illness. Insurance policies in most lines of insurance base indemnity on the insured’s actual expenses, i.e., the insured would be partially or completely reimbursed when purchasing certain goods. In this setting we discuss the interaction between insurance and repair markets by focusing, on the one hand, upon the development of prices and the market structure in markets with insured customers, and, on the other hand, the resulting backlash on optimal insurance contracting.

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Paper provided by EconWPA in its series Risk and Insurance with number 0501002.

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Length: 29 pages
Date of creation: 14 Jan 2005
Date of revision:
Handle: RePEc:wpa:wuwpri:0501002
Note: Type of Document - pdf; pages: 29
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  17. Thomas VON UNGERN-STERNBERG, 1995. "The Limits of Competition : Housing Insurance in Switzerland," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9511, Université de Lausanne, Faculté des HEC, DEEP.
  18. Maskin, Eric, 2002. "On indescribable contingencies and incomplete contracts," European Economic Review, Elsevier, vol. 46(4-5), pages 725-733, May.
  19. Shavell, Steven, 1979. "On Moral Hazard and Insurance," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 541-62, November.
  20. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-77, June.
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  24. Kunreuther, Howard & Heal, Geoffrey, 2003. " Interdependent Security," Journal of Risk and Uncertainty, Springer, vol. 26(2-3), pages 231-49, March-May.
  25. Berthold U. Wigger & Markus Anlauf, 2007. "Do Consumers Purchase Too Much Health Insurance? The Role of Market Power in Health-Care Markets," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(3), pages 547-561, 06.
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