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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

Type
Article accepté pour publication ou publié
External document link
https://hal.archives-ouvertes.fr/hal-00870113
Date
2019
Journal name
Journal of Mathematical Economics
Volume
81
Publisher
Elsevier
Pages
22-30
Publication identifier
Metadata
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Author(s)
Loss, Frédéric
Laboratoire d'Economie de Dauphine [LEDa]
Piaser, Gwenaël
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 / Keywords
Common agency; Insurance; Moral hazard; Perfect competition; Linear price equilibria
JEL
G22 - Insurance; Insurance Companies; Actuarial Studies