On the role of patience in an insurance market with asymmetric information
We analyse a 2-period competitive insurance market which is characterized by the simultaneous presence of standard moral hazard and adverse selection with regard to consumer time preferences. It is shown that there exists an equilibrium in which patient consumers use high effort and buy a profit-making insurance contract with high coverage, whereas impatient consumers use low effort and buy a contract with low coverage or even remain uninsured. This finding may help to explain why positive profits and the opposite of adverse selection with regard to risk types can sometimes be observed empirically. JEL Classification: D82, G22
| Author: | Michael Sonnenholzner, Achim Wambach |
|---|---|
| URN: | urn:nbn:de:hebis:30-38130 |
| Series (Serial Number) | CFS working paper series (2007, 04) |
| Document Type: | Working Paper |
| Language: | English |
| Date of Publication (online): | 23.02.2007 |
| Year of first Publication: | 2006 |
| Publishing Institution: | Univ.-Bibliothek Frankfurt am Main |
| Tag: | Adverse Selection ; Insurance ; Moral Hazard; Patience |
| HeBIS PPN: | 190113235 |
| Institutes: | Center for Financial Studies (CFS) |
| Dewey Decimal Classification: | 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Note: | Version July 12, 2006 |
| Licence (German): |  Veröffentlichungsvertrag für Publikationen ohne Print on Demand |
