EconPapers    
Economics at your fingertips  
 

Characterization and uniqueness of equilibrium in competitive insurance

Vitor Farinha Luz ()
Additional contact information
Vitor Farinha Luz: Vancouver School of Economics, University of British Columbia

Theoretical Economics, 2017, vol. 12, issue 3

Abstract: This paper provides a complete characterization of equilibria in a game-theoretic version of Rothschild and Stiglitz (1976)’s model of competitive insurance. I allow for stochastic contract offers by insurance firms and show that a unique symmetric equilibrium always exists. Exact conditions under which the equilibrium involves mixed strategies are provided. The mixed equilibrium features: (i) cross-subsidization across risk levels, (ii) dependence of offers on the risk distribution and (iii) price dispersion generated by firm randomization over offers.

Keywords: Asymmetric and private information; mechanism design; oligopoly; economics of contracts; insurance (search for similar items in EconPapers)
JEL-codes: C72 D43 D82 D86 G22 (search for similar items in EconPapers)
Date: 2017-09-26
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://econtheory.org/ojs/index.php/te/article/viewFile/20171349/18855/572 (application/pdf)

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:the:publsh:2166

Access Statistics for this article

Theoretical Economics is currently edited by Simon Board, Federico Echenique, Thomas Mariotti, Florian Scheuer, Ran Spiegler

More articles in Theoretical Economics from Econometric Society
Bibliographic data for series maintained by Martin J. Osborne ().

 
Page updated 2019-07-01
Handle: RePEc:the:publsh:2166