Firm Size Distribution: Testing the 'Independent Submarkets Model' in the Italian Motor Insurance Industry

Luigi Buzzacchi and Tommaso Valletti

No 3444, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper tests the presence of multiple independent submarkets in the Italian motor insurance industry. Independence is motivated by administrative boundaries among provinces and by further locational reasons. We find that the independence effects are sufficient to induce a minimum degree of inequality in the size distribution of firms once submarkets are aggregated. These results are consistent with the predictions of Sutton (1998). At the submarket level, some degree of inequality can be explained by a model of equilibrium price dispersion based on costly consumer search. Our findings show that Sutton?s limiting approach and one based on a game theoretical analysis of an industry are good complements when the industry is made of several independent submarkets.

Keywords: Size distribution of firms; Independent submarkets; Insurance companies; Price dispersion (search for similar items in EconPapers)
JEL-codes: D40 G22 L11 (search for similar items in EconPapers)
Date: 2002-07
New Economics Papers: this item is included in nep-cfn, nep-geo and nep-ias
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Citations: View citations in EconPapers (14)

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Related works:
Journal Article: Firm size distribution: Testing the "independent submarkets model" in the Italian motor insurance industry (2006)
Working Paper: Firm Size Distribution: Testing the "Independent Submarkets Model" in the Italian Motor Insurance Industry (1999)
Working Paper: Firm size distribution: testing the "independent submarkets model" in the Italian motor insurance industry (1999)
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