On the Use of Information in Oligopolistic Insurance Markets

Iris Kesternich and Heiner Schumacher

Journal of Risk & Insurance, 2014, vol. 81, issue 1, 159-175

Abstract: type="main" xml:lang="en">

We analyze the use of information in an oligopolistic insurance market with costly market entry. For intermediate values of entry costs, an equilibrium exists that is profit maximizing for incumbents and in which companies do not discriminate between high and low risks. The model therefore provides an explanation for the existence of “unused observables,” that is, information that (1) insurance companies collect or could collect, (2) is correlated with risk, but (3) is not used to set premiums.

Date: 2014
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Working Paper: On the Use of Information in Oligopolistic Insurance Markets (2014)
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