Data Linkage between Markets: Does the Emergence of an Informed Insurer Cause Consumer Harm?

CEPR Discussion Paper 17947

80 Pages Posted: 17 Oct 2022 Last revised: 26 Jul 2023

See all articles by Claudia Herresthal

Claudia Herresthal

University of Bonn

Tatiana Mayskaya

National Research University Higher School of Economics (Moscow) - International College of Economics and Finance; National Research University Higher School of Economics (Moscow) - Faculty of Economics

Arina Nikandrova

City, University of London

Date Written: July 26, 2023

Abstract

A merger of two companies active in seemingly unrelated markets creates data linkage: by operating in a product market, the merged company acquires an informational advantage in an insurance market where companies compete in menus of contracts. In the insurance market, the informed insurer earns rent through cream-skimming. Some of this rent is passed on to consumers in the product market. Overall, the data linkage makes consumers better off when the insurance market is competitive and, under some conditions, even when the insurance market is monopolistic. The role of competitiveness of the product market 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

Herresthal, Claudia and Mayskaya, Tatiana and Nikandrova, Arina, Data Linkage between Markets: Does the Emergence of an Informed Insurer Cause Consumer Harm? (July 26, 2023). CEPR Discussion Paper 17947, Available at SSRN: https://ssrn.com/abstract=4238784 or http://dx.doi.org/10.2139/ssrn.4238784

Claudia Herresthal

University of Bonn ( email )

Regina-Pacis-Weg 3
Postfach 2220
Bonn, D-53012
Germany

Tatiana Mayskaya

National Research University Higher School of Economics (Moscow) - International College of Economics and Finance ( email )

Pokrovski Bulvar 11, Korpus Zh, Office 715
Moscow, 109028
Russia

National Research University Higher School of Economics (Moscow) - Faculty of Economics ( email )

Shabolovka 26
Moscow, 119049
Russia

Arina Nikandrova (Contact Author)

City, University of London ( email )

London
United Kingdom
EC1V 0HB (Fax)

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