An Evolutionary Analysis of Insurance Markets Under Adverse Selection

Ana B. Ania (), Thomas Troger () and Achim Wambach

Working Papers from Washington St. Louis - School of Business and Political Economy

Abstract: Since the seminal work by Rothschild and Stiglitz on competitive insurance markets under adverse selection the problem of non-existence of equilibrium hat puzzled many economists. In this paper we approach this problem from an evolutionary point of view. In a dynamic model insurance companies remove lossmaking contracts from the market and copy profit making ones. Occasionally, they also experiment, adding new contracts or removing current ones arbitrarily. We show that the Rothschild-Stiglitz outcome arises in the long run if it cinstitutes an equilibrium in the static framework, but also if it is not an equilibrium, provides that firms only experiment with contracts in the vicinity of their current portfolio.

Keywords: INSURANCE MARKET; ADVERSE SELECTION; GAME THEORY; INFORMATION (search for similar items in EconPapers)
JEL-codes: C70 C72 D82 G22 L10 (search for similar items in EconPapers)
Date: 1998

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: An Evolutionary Analysis of Insurance Markets under Adverse Selection (1998)
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: http://EconPapers.repec.org/RePEc:fth:waslbp:9808

Access Statistics for this paper

More papers in Working Papers from Washington St. Louis - School of Business and Political Economy
Address: WASHINGTON UNIVERSITY IN ST-LOUIS, SCHOOL OF BUSINESS AND CENTER IN POLITICAL ECONOMY, ST-LOUIS MISSOURI 63130 U.S.A.
Contact information at EDIRC.
Series data maintained by Thomas Krichel ().