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Quality, self-regulation, and competition: the case of insurance

Författare:
Publiceringsår: 2003
Språk: Engelska
Sidor: 267-280
Publikation/Tidskrift/Serie: Insurance: Mathematics and Economics
Volym: 32
Nummer: 2
Dokumenttyp: Artikel
Förlag: Elsevier Science

Sammanfattning

In this paper, insurers' credibility problems explain contracting, co-operation, and regulation in the insurance industry. First, it is noted that cheating by policyholders may be eliminated if the insurer withholds compensation on the basis of detecting careless behaviour with high enough probability. Then, assuming that care taken is imperfectly observable and non-contractible, the problem that insurers may deceive policyholders is addressed. In a repeated game, insurers' building a reputation for being generous can sustain an efficient outcome. Finally, intra-industry co-operation is considered; it is shown that the industry's monitoring care and "fair" compensation, while sustaining monopolistic pricing, mitigates negative credibility externalities. (C) 2003 Elsevier Science B.V. All rights reserved.

Disputation

Nyckelord

  • Business and Economics
  • generosity
  • competition
  • credibility externalities
  • self-regulation

Övriga

Published
Yes
  • ISSN: 0167-6687

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