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On the Use of Information in Oligopolistic Insurance Markets

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  • Kesternich, Iris
  • Schumacher, Heiner

Abstract

We analyze the use of information in an oligopolistic insurance market with costly market entry. For intermediate values of entry costs, an equilibrium exists that is profit maximizing for incumbents and in which companies do not discriminate between high and low risks. The model therefore provides an explanation for the existence of \"unused observables,\" that is, information that (1) insurance companies collect or could collect, (2) is correlated with risk, but (3) is not used to set premiums.

Suggested Citation

  • Kesternich, Iris & Schumacher, Heiner, 2014. "On the Use of Information in Oligopolistic Insurance Markets," Munich Reprints in Economics 19472, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:19472
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    Cited by:

    1. Karlsson, Martin & Klohn, Florian & Rickayzen, Ben, 2018. "The role of heterogeneous parameters for the detection of selection in insurance contracts," Insurance: Mathematics and Economics, Elsevier, vol. 83(C), pages 110-121.

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