Date: 2017
Type: Article
Characterization and uniqueness of equilibrium in competitive insurance
Theoretical economics, 2017, Vol. 12, No. 3, pp. 1349-1391
FARINHA LUZ, Vitor, Characterization and uniqueness of equilibrium in competitive insurance, Theoretical economics, 2017, Vol. 12, No. 3, pp. 1349-1391
- https://hdl.handle.net/1814/69732
Retrieved from Cadmus, EUI Research Repository
This paper provides a complete characterization of equilibria in a game-theoretic version of Rothschild and Stiglitz's (1976) model of competitive insurance. I allow for stochastic contract offers by insurance firms and show that a unique symmetric equilibrium always exists. Exact conditions under which the equilibrium involves mixed strategies are provided. The mixed equilibrium features (i) cross-subsidization across risk levels, (ii) dependence of offers on the risk distribution, and (iii) price dispersion generated by firm randomization over offers.
Additional information:
Published: 22 SEP 2017
Cadmus permanent link: https://hdl.handle.net/1814/69732
Full-text via DOI: 10.3982/TE2166
ISSN: 1555-7561
Publisher: Wiley
Initial version: http://hdl.handle.net/1814/36675
Version: Based on EUI WP EUI MWP 2015/15
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