Equilibrium in insurance markets with adverse selection when insurers pay policy dividends

Pierre Picard

Working Papers from HAL

Abstract: We show that an equilibrium always exists in the Rothschild-Stiglitz insurance market model with adverse selection and an arbitrary number of risk types, when insurance contracts include policy dividend rules. The Miyazaki-WilsonSpence state-contingent allocation is an equilibrium allocation, and it is the only one when out-of-equilibrium beliefs satisfy a robustness criterion. It is shown that stock insurers and mutuals may coexist, with stock insurers o⁄ering insurance coverage at actuarial price and mutuals cross-subsidizing risks.

Keywords: Participating Contract; Policy Dividend; Insurance; Adverse Selection; Mutual (search for similar items in EconPapers)
Date: 2016-07-01
New Economics Papers: this item is included in nep-cta, nep-ias and nep-mic
Note: View the original document on HAL open archive server: https://polytechnique.hal.science/hal-01206073v2
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Related works:
Journal Article: Equilibrium in Insurance Markets With Adverse Selection When Insurers Pay Policy Dividends (2019)
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