Data Linkage between Markets: Does the Emergence of an Informed Insurer Cause Consumer Harm?
CEPR Discussion Paper 17947
77 Pages Posted: 17 Oct 2022 Last revised: 26 May 2023
Date Written: May 26, 2023
Abstract
A merger of two companies that are active in seemingly unrelated markets creates data linkage: by selling a product in one market, the merged company acquires informational advantage in a competitive insurance market. In the insurance market, the informed insurer earns an economic rent through cream-skimming. Some of this rent is competed away in the product market. Overall, the data linkage makes consumers better off. The role of competitiveness of each market, the possibility of market monopolization and the data-sharing requirement are discussed.
Keywords: insurance market, asymmetric information, data linkage, digital market
JEL Classification: D4, D82, G22, L22, L41, L86
Suggested Citation: Suggested Citation