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The Role of Memory in Long-Term Contracting with Moral Hazard: Empirical Evidence in Automobile Insurance

Georges Dionne, M. Maurice, Jean Pinquet () and C. Vanasse

Ecole des Hautes Etudes Commerciales de Montreal- from Ecole des Hautes Etudes Commerciales de Montreal-Chaire de gestion des risques.

Abstract: This paper tests the efficiency associated with the role of memory in long-term contracting. Bonus-malus schemes in automobile insurance are examples of contracts that use memory. During the eighties different contributors (Lambert, 1983, Rogerson, 1985, Boyer, and Dionne, 1989) showed how multi-period contracting under moral hazard improves resource allocation. In particular, it was demonstrated that multi-period contracts with memory outperform those without memory under full commitment.

Keywords: AUTOMOBILES; INSURANCE; INSURANCE COMPANIES (search for similar items in EconPapers)
JEL-codes: D80 G22 (search for similar items in EconPapers)
Date: 2001
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