Competition Effects of Price Liberalization in Insurance

Pedro Barros

Journal of Industrial Economics, 1996, vol. 44, issue 3, 267-87

Abstract: Insurance services have a prominent role in modern societies. Empirical evaluation of market interactions in insurance is, however, scarce. To fill this gap, two models are proposed. Each captures the main features of either regulated or deregulated markets. Three levels of decisions (reinsurance, sales effort, and prices) generate testable predictions on firm behavior with respect to sales effort choices. Recent evolution of the Portuguese market provides a natural data set for application. Estimation before and after price deregulation reveals a noticeable change in behavior. Coordination has characterized the interaction under price regulation. Competition between firms has increased after deregulation. Copyright 1996 by Blackwell Publishing Ltd.

Date: 1996
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