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 exist
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
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Metadaten
Author:Michael Sonnenholzner, Achim Wambach
URN:urn:nbn:de:hebis:30-38130
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2007,04
Series (Serial Number):CFS working paper series (2007, 04)
Document Type:Working Paper
Language:English
Year of Completion:2006
Year of first Publication:2006
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2007/02/23
Tag:Adverse Selection; Insurance; Moral Hazard; Patience
SWD-Keyword:Geduld; Gleichgewicht; Verbraucher; Versicherungsmarkt
Issue:This Version July 12, 2006
Pagenumber:32
HeBIS PPN:190113235
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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