On the Use of Information in Repeated Insurance Markets

Iris Kesternich () and Heiner Schumacher ()
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Iris Kesternich: Ludwig Maximilian Universität München
Heiner Schumacher: Goethe Universität Frankfurt

No 280, Discussion Papers from SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: We analyze the use of information in a repeated oligopolistic insurance market. To sustain collusion, insurance companies might refrain from changing their pricing schedules even if new information about risks becomes available. We therefore provide an explanation for the existence of "unused observables" that is information which a) insurance companies collect or could collect, b) is correlated with the risk experience, but c) is not used by companies to set prices. Furthermore, the existence of bulk discounts becomes rationalizable. These results also obtain if we include communication among companies and market entry to our framework.

Keywords: repeated games; insurance markets; oligopoly; unused observables (search for similar items in EconPapers)
JEL-codes: C72 G22 L13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-cta, nep-ias and nep-mic
Date: 2009-09
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