Time Deductibles as Screening Devices: Competitive Markets

Spreeuw, J. & Karlsson, M. (2009). Time Deductibles as Screening Devices: Competitive Markets. Journal Of Risk And Insurance, 76(2), pp. 261-278. doi: 10.1111/j.1539-6975.2009.01298.x

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Abstract

Seminal papers on asymmetric information in competitive insurance markets, analysing the monetary deductible as a screening device, show that any existing equilibrium is of a separating type. High risks buy complete insurance whilst low risks buy partial insurance - and this result holds for Nash behaviour as well as for Wilson foresight. In this paper, we analyze the strength of screening based on limitations to the period of coverage of the contract. We show that in this case a) the Nash equilibrium may entail low risks purchasing any insurance at all and b) under Wilson foresight, a pooling equilibrium may exist.

Item Type: Article
Additional Information: This is the accepted version of the following article: Spreeuw, J. and Karlsson, M. (2009), Time Deductibles as Screening Devices: Competitive Markets. Journal of Risk and Insurance, 76: 261–278., which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1111/j.1539-6975.2009.01298.x/abstract
Uncontrolled Keywords: time deductibles, adverse selection, Nash equilibrium, Wilson foresight
Subjects: H Social Sciences > HG Finance
Divisions: Cass Business School > Faculty of Actuarial Science & Insurance
Related URLs:
URI: http://openaccess.city.ac.uk/id/eprint/5031

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