Insuring product markets

Jeroen (J.) Hinloopen () and Lting Zhou ()
Additional contact information
Jeroen (J.) Hinloopen: University of Amsterdam
Lting Zhou: Tinbergen Institute

No 18-090/VII, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We formally link insurance markets with product markets and identify a demand effect of insurance: if risk-averse consumers can buy insurance against possible product failure, there will be some additional consumers that buy the product because they can also purchase protection. The concomitant upward pressure on price is further fueled by those consumers that have a higher willingness to pay if they can also buy insurance. But a higher price causes those consumers to leave the market that would have bought the product absent insurance. Introducing insurance thus has an ambiguous effect on price, consumers' surplus, and total surplus.

Keywords: product failure; insured loss; insurance; product markets; demand effect of insurance (search for similar items in EconPapers)
JEL-codes: D21 D43 L13 (search for similar items in EconPapers)
Date: 2018-11-20
New Economics Papers: this item is included in nep-com, nep-ias and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://papers.tinbergen.nl/18090.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20180090

Access Statistics for this paper

More papers in Tinbergen Institute Discussion Papers from Tinbergen Institute Contact information at EDIRC.
Bibliographic data for series maintained by Tinbergen Office +31 (0)10-4088900 ().