Public versus Private Insurance System with (and without) Transaction Costs: Optimal Segmentation Policy of an Informed monopolistPublic versus Private Insurance System with (and without) Transaction Costs: Optimal Segmentation Policy of an Informed monopolist

Yann Braouezec ()
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Yann Braouezec: IESEG School of Management (LEM-CNRS)

No 2013-ECO-23, Working Papers from IESEG School of Management

Abstract: Computer mediated transactions ([Varian, 2010]) allow insurance companies to customize their contracts while transaction costs limits this tendency toward customization. To capture this, we develop a complete-information framework in which it is costly to design a new market segment when the segmentation policy (number and design of segments) is endogenously chosen. Both the case of a private and a public insurer are considered. Without transaction cost, these two insurance systems are equivalent in terms of social welfare and participation. With transaction costs, this equivalence is not anymore true and the analysis of this difference is the subject of this article.

Keywords: Insurance; large economy; participation; direct segmentation; transaction costs; social welfare (search for similar items in EconPapers)
JEL-codes: D04 D42 D60 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2015-12, Revised 2014-05
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Persistent link: https://EconPapers.repec.org/RePEc:ies:wpaper:e201323

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