On the Use of Information in Oligopolistic Insurance Markets

17 Pages Posted: 15 Feb 2014

See all articles by Iris Kesternich

Iris Kesternich

KU Leuven - Department of Economics; Ludwig Maximilian University of Munich (LMU) - Faculty of Economics

Heiner Schumacher

KU Leuven - Faculty of Business and Economics (FEB)

Date Written: March 2014

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 and Schumacher, Heiner, On the Use of Information in Oligopolistic Insurance Markets (March 2014). Journal of Risk and Insurance, Vol. 81, Issue 1, pp. 159-175, 2014. Available at SSRN: https://ssrn.com/abstract=2396231 or http://dx.doi.org/10.1111/j.1539-6975.2012.01490.x

Iris Kesternich (Contact Author)

KU Leuven - Department of Economics ( email )

Leuven, B-3000
Belgium

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

Heiner Schumacher

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Register to save articles to
your library

Register

Paper statistics

Downloads
0
Abstract Views
253
PlumX Metrics