Linear Prices Equilibria and Nonexclusive Insurance Market

Frédéric Loss () and Gwenael Piaser ()

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Abstract: We consider a competitive insurance market in which agents can privately enter into multicontractual insurance relationships and undertake hidden actions. We study the existence of linear equilibria when insurance companies do not have any restriction on their pricing rules. We provide conditions under which a linear equilibrium exists. We show that two different types of linear equilibria could exist: A first one in which insurance companies make zero expected profits, and a second one in which they make strictly positive expected profits. We also analyze the welfare properties of the linear equilibria. We show that they are not always second best Pareto optimal.

Keywords: Common Agency; Insurance; Moral Hazard; Perfect Competition; Linear Prices Equilibria (search for similar items in EconPapers)
Date: 2013-10-05
New Economics Papers: this item is included in nep-com, nep-cta, nep-ias and nep-mic
Note: View the original document on HAL open archive server: https://hal.science/hal-00870113
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Working Paper: Linear Prices Equilibria and Nonexclusive Insurance Market (2014)
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