Abstract
This paper examines the form of insurance contracts in the presence of asymmetric information about consumers' accident probabilities. Our goal is to understand the adjustment in contract terms as a function of accident histories in a finite horizon model. We also compare these adjustments between alternative market structures. Our principal findings indicate that history dependent insurance contracts serve a useful sorting role. Individuals who declare themselves 'low risks' to insurance companies face adverse contractural terms if they subsequently have many accidents. These adjustments are strongest in the case of a single insurance seller but are present in the competitive model as well.
Original language | English (US) |
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Pages (from-to) | 211-231 |
Number of pages | 21 |
Journal | International Journal of Industrial Organization |
Volume | 5 |
Issue number | 2 |
DOIs | |
State | Published - 1987 |
All Science Journal Classification (ASJC) codes
- Industrial relations
- Aerospace Engineering
- Economics and Econometrics
- Economics, Econometrics and Finance (miscellaneous)
- Strategy and Management
- Industrial and Manufacturing Engineering