Reinsurance games with two reinsurers: Tree versus chain

Jingyi Cao, Dongchen Li, Virginia R. Young and Bin Zou

European Journal of Operational Research, 2023, vol. 310, issue 2, 928-941

Abstract: This paper studies reinsurance contracting and competition in a continuous-time model with ambiguity. The market consists of one insurer and two reinsurers, who apply a generalized expected-value premium principle and a generalized variance premium principle to price reinsurance contracts, respectively. The reinsurance contracting problems between the insurer and reinsurers are resolved by Stackelberg differential games, and the reinsurance competition between two reinsurers is settled by a non-cooperative Nash game. We obtain the closed-form equilibrium strategies for all three players under both a tree structure and a chain structure. A detailed comparison study reveals that the tree structure is preferred to the chain structure from a social planner’s perspective, and the tree structure is generally preferred from the insurer’s perspective.

Keywords: Game theory; Stackelberg differential game; Non-cooperative Nash game; Optimal reinsurance; Ambiguity (search for similar items in EconPapers)
JEL-codes: C61 C72 C73 D81 G22 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:310:y:2023:i:2:p:928-941

DOI: 10.1016/j.ejor.2023.04.005

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