Beyond Testing: Empirical Models of Insurance Markets
Stanford University - Department of Economics; National Bureau of Economic Research (NBER)
Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)
Stanford University - Department of Economics; Stanford Graduate School of Business; National Bureau of Economic Research (NBER)
Annual Review of Economics, Vol. 2, pp. 311-336, 2010
We describe recent advances in the empirical analysis of insurance markets. This new research proposes ways to estimate individual demand for insurance and the relationship between prices and insurer costs in the presence of adverse and advantageous selection. We discuss how these models permit the measurement of welfare distortions arising from asymmetric information and the welfare consequences of potential government policy responses. We also discuss some challenges in modeling imperfect competition between insurers and outline a series of open research questions.
Date posted: October 18, 2010