Regulation Design in Insurance Markets

Dhruva Bhaskar, Andrew McClellan and Evan Sadler

American Economic Review, 2023, vol. 113, issue 10, 2546-80

Abstract: Regulators often impose rules that constrain the behavior of market participants. We study the design of regulatory policy in an insurance market as a delegation problem. A regulator restricts the menus of contracts an informed firm is permitted to offer, the firm offers a permitted menu to each consumer, and consumers choose contracts from offered menus. If consumer types and firm signals are ordered in a way that reflects coverage need, the regulator can leverage the firm's information by forcing the firm to offer specified additional options on each menu. Several extensions illustrate the practical application of our results.

JEL-codes: D21 D43 D82 D86 G22 G28 L51 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1257/aer.20210710

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