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 |
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: | Universitätsbibliothek Johann Christian Senckenberg |
Release Date: | 2007/02/23 |
Tag: | Adverse Selection; Insurance; Moral Hazard; Patience |
GND Keyword: | Versicherungsmarkt; Gleichgewicht; Verbraucher; Geduld |
Issue: | This Version July 12, 2006 |
Page Number: | 32 |
HeBIS-PPN: | 190113235 |
Institutes: | Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) |
Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Licence (German): | Deutsches Urheberrecht |