Pareto-improving asymmetric information in a dynamic insurance market

Garidel, Thomas (1997) Pareto-improving asymmetric information in a dynamic insurance market. Financial Markets Group Discussion Papers (266). Financial Markets Group, The London School of Economics and Political Science, London, UK.

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Abstract

This paper explored the dynamics of insurance markets under incomplete information. Various information structures are examined, according to the degree of communication between companies. We get equilibrium existence even when adverse selection arises through differentiated learning. This and the Pareto-dominance of private information structures seem to mitigate the prevalent view that adverse selection and competition do not match well in insurance markets; moreover, it provides a new scope for empirical studies. Technically, we extend to dynamics Rothschild-Stiglitz' equilibrium concept, and get to reconsider the "no-malus" property, which we prove to result from the non-consideration of feed-back effects of future on present.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://www.fmg.ac.uk/
Additional Information:	© 1997 The Author(s)
Divisions:	Financial Markets Group
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance
JEL classification:	C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C70 - General G - Financial Economics > G1 - General Financial Markets > G10 - General
Date Deposited:	30 Jun 2023 10:27
Last Modified:	11 Dec 2024 19:48
URI:	http://eprints.lse.ac.uk/id/eprint/119146

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