Facilitating Consumer Learning in Insurance Markets:  What Are the Welfare Effects?

B-Tier
Journal: Scandanavian Journal of Economics
Year: 2018
Volume: 120
Issue: 2
Pages: 465-502

Score contribution per author:

1.005 = (α=2.01 / 2 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We model a monopoly insurance market in which consumers can learn their accident risks at a cost c. We then examine the welfare effects of a policy that reduces c. If c is sufficiently small (c < c*), the optimal contract is such that the consumer gathers information. For c < c*, both the insurer and the consumer benefit from a policy that reduces c further. For c  >  c*, marginally reducing c hurts the insurer and weakly benefits the consumer. Finally, a reduction in c that is successful, meaning that the consumer gathers information after the reduction but not before it, can hurt both parties.

Technical Details

RePEc Handle
repec:bla:scandj:v:120:y:2018:i:2:p:465-502
Journal Field
General
Author Count
2
Added to Database
2026-01-25