Economics at your fingertips  

Stackelberg Equilibrium Premium Strategies for Push-Pull Competition in a Non-Life Insurance Market with Product Differentiation

Søren Asmussen (), Bent Jesper Christensen () and Julie Thøgersen ()
Additional contact information
Søren Asmussen: Department of Mathematics, Aarhus University, 8000 Aarhus, Denmark
Julie Thøgersen: Department of Mathematics, Aarhus University, 8000 Aarhus, Denmark

Risks, 2019, vol. 7, issue 2, 1-23

Abstract: Two insurance companies I 1 , I 2 with reserves R 1 ( t ) , R 2 ( t ) compete for customers, such that in a suitable differential game the smaller company I 2 with R 2 ( 0 ) < R 1 ( 0 ) aims at minimizing R 1 ( t ) − R 2 ( t ) by using the premium p 2 as control and the larger I 1 at maximizing by using p 1 . Deductibles K 1 , K 2 are fixed but may be different. If K 1 > K 2 and I 2 is the leader choosing its premium first, conditions for Stackelberg equilibrium are established. For gamma-distributed rates of claim arrivals, explicit equilibrium premiums are obtained, and shown to depend on the running reserve difference. The analysis is based on the diffusion approximation to a standard Cramér-Lundberg risk process extended to allow investment in a risk-free asset.

Keywords: Stochastic differential game; Product differentiation; Adverse selection; Stackelberg equilibrium (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 M2 M4 K2 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf) (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Risks is currently edited by Prof. Dr. J. David Cummins

More articles in Risks from MDPI, Open Access Journal
Bibliographic data for series maintained by XML Conversion Team ().

Page updated 2019-10-16
Handle: RePEc:gam:jrisks:v:7:y:2019:i:2:p:49-:d:227500