Multiple Contracting in Insurance Markets

Andrea Attar, Thomas Mariotti and François Salanié

No 14-532, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We study insurance markets in which privately informed consumers can purchase coverage from several insurers. Under adverse selection, multiple contracting severely restricts feasible trades. Indeed, only one budget-balanced allocation is implementable by an entry-proof tariff, and each layer of coverage must be fairly priced given the consumer types who purchase it. This allocation is the unique equilibrium outcome of a game in which cross-subsidies between contracts are prohibited. Equilibrium contracts exhibit quantity discounts and negative correlation between risk and coverage. Public intervention should target insurers’ strategic behavior, while consumers can be left free to choose their preferred amount of coverage.

Keywords: Insurance Markets; Multiple Contracting; Adverse Selection (search for similar items in EconPapers)
JEL-codes: D43 D82 D86 (search for similar items in EconPapers)
Date: 2014-10, Revised 2016-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Working Paper: Multiple Contracting in Insurance Markets (2016)
Working Paper: Multiple Contracting in Insurance Markets (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:28620

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