Insurance Contracts Designed by Competitive Pooling

Pradeep Dubey and J. Geanakoplos

Department of Economics Working Papers from Stony Brook University, Department of Economics

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.

JEL-codes: D4 D41 D5 D52 D81 D82 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2001
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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Persistent link: https://EconPapers.repec.org/RePEc:nys:sunysb:01-09

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