Not Available for Download

Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry

Posted: 17 Jul 2002  

Jeffrey R. Brown

University of Illinois at Urbana-Champaign - Department of Finance; National Bureau of Economic Research (NBER); University of Illinois College of Law; University of Illinois at Urbana-Champaign - Institute of Government and Public Affairs (IGPA); University of Illinois at Urbana-Champaign - Department of Economics

Austan Goolsbee

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Abstract

The Internet may significantly reduce search costs by enabling price comparisons on-line. This paper provides empirical evidence on how Internet comparison shopping sites affected the prices of life insurance in the 1990s. Using micro data on individual insurance policies and controlling for individual and policy characteristics, it shows that increases in Internet use significantly reduced the price of term life insurance. Further evidence shows that prices did not fall with rising Internet usage in the period before the sites began, nor for insurance types that were not covered on the sites. The results suggest that growth of the Internet has reduced term life prices by 8-15 percent. The results also show that the initial introduction of the Internet search sites is initially associated with an increase in price dispersion within demographic groups, but as use spreads, the dispersion falls.

Suggested Citation

Brown, Jeffrey R. and Goolsbee, Austan, Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry. Journal of Political Economy, Vol. 110, June 2002. Available at SSRN: https://ssrn.com/abstract=309722

Jeffrey R. Brown

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Illinois College of Law ( email )

504 E. Pennsylvania Avenue
Champaign, IL 61820
United States

University of Illinois at Urbana-Champaign - Institute of Government and Public Affairs (IGPA) ( email )

Urbana, IL 61801
United States

University of Illinois at Urbana-Champaign - Department of Economics ( email )

410 David Kinley Hall
1407 W. Gregory
Urbana, IL 61801
United States

Austan Goolsbee (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-5869 (Phone)
773-702-0458 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paper statistics

Abstract Views
1,563