Cost Function Estimation and Quality Bias: The Regulated Automobile Insurance Industry

Ronald R. Braeutigam and Mark V. Pauly

RAND Journal of Economics, 1986, vol. 17, issue 4, 606-617

Abstract: This article explores the implications of endogenous product quality (and therefore endogenous output) in the empirical estimation of cost functions for regulated automobile collision insurance firms. It contains a structural model of such a firm and provides an illustration of the types of biases that can result if data on quality of service are unavailable or otherwise omitted. The analysis shows how the directions of biases depend on the nature of the variations in the observed (nonquality) data. A new test suggests that such bias is present in insurance cost functions.

Date: 1986
References: Add references at CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://links.jstor.org/sici?sici=0741-6261%2819862 ... O%3B2-4&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

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: https://EconPapers.repec.org/RePEc:rje:randje:v:17:y:1986:i:winter:p:606-617

Ordering information: This journal article can be ordered from
https://editorialexp ... i-bin/rje_online.cgi

Access Statistics for this article

More articles in RAND Journal of Economics from The RAND Corporation
Bibliographic data for series maintained by ().