Monopoly Insurance and Endogenous Information
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Monopoly Insurance and Endogenous Information. / Lagerlöf, Johan N. M.; Schottmüller, Christoph.
I: International Economic Review, Bind 59, Nr. 1, 29.01.2018, s. 233-255.Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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TY - JOUR
T1 - Monopoly Insurance and Endogenous Information
AU - Lagerlöf, Johan N. M.
AU - Schottmüller, Christoph
PY - 2018/1/29
Y1 - 2018/1/29
N2 - We study a monopoly insurance model with endogenous information acquisi-tion. Through a continuous effort choice, consumers can determine the precision of a privately observed signal that is informative about their accident risk. The equilibrium effort is, depending on parameter values, either zero (implying symmetric information) or positive (implying privately informed consumers). Regardless of the nature of the equilibrium, all offered contracts, also at the top, involve underinsurance, which discourages information gathering. We identify a missorting effect that explains why the insurer wants to discourage information acquisition. Moreover, lower information gathering costs can hurt both consumer and insurer.
AB - We study a monopoly insurance model with endogenous information acquisi-tion. Through a continuous effort choice, consumers can determine the precision of a privately observed signal that is informative about their accident risk. The equilibrium effort is, depending on parameter values, either zero (implying symmetric information) or positive (implying privately informed consumers). Regardless of the nature of the equilibrium, all offered contracts, also at the top, involve underinsurance, which discourages information gathering. We identify a missorting effect that explains why the insurer wants to discourage information acquisition. Moreover, lower information gathering costs can hurt both consumer and insurer.
U2 - 10.1111/iere.12268
DO - 10.1111/iere.12268
M3 - Journal article
VL - 59
SP - 233
EP - 255
JO - International Economic Review
JF - International Economic Review
SN - 0020-6598
IS - 1
ER -
ID: 222753210