Linear Prices Equilibria and Non-exclusive Insurance Market
Loss, Frédéric; Piaser, Gwenaël (2019), Linear Prices Equilibria and Non-exclusive Insurance Market, Journal of Mathematical Economics, 81, p. 22-30. 10.1016/j.jmateco.2018.12.006
TypeArticle accepté pour publication ou publié
External document linkhttps://hal.archives-ouvertes.fr/hal-00870113
Journal nameJournal of Mathematical Economics
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Abstract (EN)We consider a competitive insurance market in which agents can privately enter into multi-contractual insurance relationships and undertake hidden actions. We study the existence of a linear equilibrium when insurance companies have no restrictions on their pricing rules. For CARA utility functions, we show that a linear equilibrium always exists. For DARA utility functions, we provide sufficient conditions under which a linear equilibrium exists. We show that the linear equilibrium is unique, actuarially unfair, and induces partial insurance coverage. Lastly, we show that the linear equilibrium is always third-best efficient.
Subjects / KeywordsCommon agency; Insurance; Moral hazard; Perfect competition; Linear price equilibria
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