Smart home insurance: Collaboration and pricing
Debajyoti Biswas and
Sara Rezaee Vessal
European Journal of Operational Research, 2024, vol. 314, issue 1, 176-205
Abstract:
A product marketed as smart home insurance combines home insurance and “smart” home products, at an attractive price, so that customers are better protected from hazards and hence the insurance company suffers fewer losses. Our study analyzes two policies offered by insurers to promote the adoption of smart products: a discount on insurance either with or without offering a free smart product to customers. We examine the insurer’s preferences with regard to these two policies for two types of interactions with the smart product manufacturer (SPM): the no-contract setting and the wholesale-price contract setting. A Nash model allows us to compare the players’ pricing decisions regarding both types of policies and different interactions. For the wholesale-price contract, we find that the insurer always prefers the free smart product policy (the insurer incurs the cost of the smart product). In the no-contract setting, the insurer prefers the free smart product unless the product development cost coefficient is high. We observe that the change in an insurer’s decisions—namely, those that are affected by hazard and customer characteristics—varies with the type of interaction. Finally, when an SPM is the market leader, we find that insurers are indifferent between the two promotional policies because the same profit results in both cases.
Keywords: Supply chain management; Smart home insurance; Wholesale-price contract; Pricing; Discount (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0377221723007075
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:314:y:2024:i:1:p:176-205
DOI: 10.1016/j.ejor.2023.09.004
Access Statistics for this article
European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati
More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().