Dynamic price competition in auto insurance brokerage

Luis Braido () and Bruno C.A. Ledo

RAND Journal of Economics, 2018, vol. 49, issue 4, 914-935

Abstract: We analyze Brazilian data on auto insurance and document that (a) about 20% of policies are sold without brokerage commission; (b) over 40% are sold at the highest fee allowed; and (c) the remaining contracts are associated with a spread‐out distribution of fees. Static models cannot rationalize these findings. We develop a dynamic model of price competition with search and switching costs that reproduces them. We use the equilibrium structure to estimate the model parameters and infer the brokers' expected earnings, the frequency that insurees switch brokers, and the counterfactual effects of a price ceiling policy.

Date: 2018
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Citations: View citations in EconPapers (4)

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https://doi.org/10.1111/1756-2171.12256

Related works:
Working Paper: Dynamic Price Competition in Auto-Insurance Brokerage (2009)
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