Firm Size Distribution: Testing the 'Independent Submarkets Model' in the Italian Motor Insurance Industry

39 Pages Posted: 3 Sep 2002

See all articles by Luigi Buzzacchi

Luigi Buzzacchi

Polytechnic University of Turin

Tommaso M. Valletti

Imperial College Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2002

Abstract

This Paper tests the presence of multiple independent submarkets in the Italian motor insurance industry. Independence is motivated by administrative boundaries among provinces and by further locational reasons. We find that the independence effects are sufficient to induce a minimum degree of inequality in the size distribution of firms once submarkets are aggregated. These results are consistent with the predictions of Sutton (1998). At the submarket level, some degree of inequality can be explained by a model of equilibrium price dispersion based on costly consumer search. Our findings show that Sutton's limiting approach and one based on a game theoretical analysis of an industry are good complements when the industry is made of several independent submarkets.

Keywords: Size distribution of firms, independent submarkets, insurance companies, price dispersion

JEL Classification: D40, G22, L11

Suggested Citation

Buzzacchi, Luigi and Valletti, Tommaso M., Firm Size Distribution: Testing the 'Independent Submarkets Model' in the Italian Motor Insurance Industry (July 2002). CEPR Discussion Paper No. 3444. Available at SSRN: https://ssrn.com/abstract=324968

Luigi Buzzacchi (Contact Author)

Polytechnic University of Turin ( email )

Corso Duca degli Abruzzi, 24
Torino, Torino 10129
Italy

Tommaso M. Valletti

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
16
Abstract Views
894
PlumX Metrics