On the Role of Patience in an Insurance Market with Asymmetric Information

19 Pages Posted: 5 May 2009

See all articles by Michael Sonnenholzner

Michael Sonnenholzner

affiliation not provided to SSRN

Achim Wambach

ZEW – Leibniz Centre for European Economic Research; University of Mannheim; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Abstract

We analyze a two-period competitive insurance market that is characterized by the simultaneous presence of moral hazard and adverse selection with regard to consumer time preferences. It is shown that there exists an equilibrium in which patient consumers use high effort and buy an insurance contract with high coverage, whereas impatient consumers use low effort and buy a contract with low coverage or even remain uninsured. This finding may help to explain why the opposite of adverse selection with regard to risk types can sometimes be observed empirically.

Suggested Citation

Sonnenholzner, Michael and Wambach, Achim, On the Role of Patience in an Insurance Market with Asymmetric Information. Journal of Risk and Insurance, Vol. 76, Issue 2, pp. 323-341, June 2009. Available at SSRN: https://ssrn.com/abstract=1399105 or http://dx.doi.org/10.1111/j.1539-6975.2009.01301.x

Michael Sonnenholzner (Contact Author)

affiliation not provided to SSRN

No Address Available

Achim Wambach

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

University of Mannheim ( email )

Universitaetsbibliothek Mannheim
Zeitschriftenabteilung
Mannheim, 68131
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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