Regulating Inaction: The Case of Price Walking

Jamie Coen, Alessandro Gavazza, Daniel Gottlieb and Tarun Ramadorai

No 21357, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We develop a theoretical model and test its predictions using granular search, choice, and pricing data from the UK motor insurance market around the introduction of price walking regulation. Before the policy, insurers attracted new customers with low prices while raising prices for existing customers. After regulation, introductory discounts to likely inactive customers fell, but insurers responded by proliferating products and segmenting the market more finely. Inactive customers therefore still pay a substantial price penalty relative to active searchers, through different mechanisms. Our findings illustrate how firms can redesign products in ways that blunt even well-designed regulation.

Keywords: Insurance; Financial regulation (search for similar items in EconPapers)
Date: 2026-04
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