Insurance Contracts Designed by Competitive Pooling

Pradeep Dubey and John Geanakoplos ()
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John Geanakoplos: Cowles Foundation, Yale University, https://economics.yale.edu/people/faculty/john-geanakoplos

No 1315, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We build a model of competitive pooling and show how insurance contracts emerge in equilibrium, designed by the invisible hand of perfect competition. When pools are exclusive, we obtain a unique separating equilibrium. When pools are not exclusive but seniority is recognized, we obtain a different unique equilibrium: the pivotal primary-secondary equilibrium. Here reliable and unreliable households take out a common primary insurance up to its maximum limit, and then unreliable households take out further secondary insurance.

Keywords: Competitive pooling; insurance contracts; adverse selection; signalling; seniority; equilibrium refinement (search for similar items in EconPapers)
JEL-codes: D4 D41 D5 D52 D81 D82 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2001-08
New Economics Papers: this item is included in nep-ent, nep-ias and nep-net
References: View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: Insurance Contracts Designed by Competitive Pooling (2001)
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