Facilitating Consumer Learning in Insurance Markets --- What Are The Welfare Effects?
Publikation: Working paper › Forskning
Standard
Facilitating Consumer Learning in Insurance Markets --- What Are The Welfare Effects? / Lagerlöf, Johan NM; Schottmüller, Christoph.
Kbh : Økonomisk institut, Københavns Universitet, 2013.Publikation: Working paper › Forskning
Harvard
APA
Vancouver
Author
Bibtex
}
RIS
TY - UNPB
T1 - Facilitating Consumer Learning in Insurance Markets --- What Are The Welfare Effects?
AU - Lagerlöf, Johan NM
AU - Schottmüller, Christoph
N1 - JEL codes: D82, I13
PY - 2013
Y1 - 2013
N2 - What are the welfare effects of a policy that facilitates for insurance customers to privately and covertly learn about their accident risks? We endogenize the information structure in Stiglitz's classic monopoly insurance model. We first show that his results are robust: For a small information acquisition cost c, the consumer gathers information and the optimal contracts are close to the ones in the Stiglitz model. If c is so low that the consumer already gathers information (c < c), both insurer and consumer benefit from a policy that reduces c further. Forc > c, marginally reducing c hurts the insurer and weakly benefits the consumer.Paradoxically, a reduction in c that is "successful," meaning that the consumergathers information after the reduction but not before it, can hurt both parties.The reasons for this are that, after the reduction, (i) the cost is actually incurredand (ii) the contracts can be more distorted.
AB - What are the welfare effects of a policy that facilitates for insurance customers to privately and covertly learn about their accident risks? We endogenize the information structure in Stiglitz's classic monopoly insurance model. We first show that his results are robust: For a small information acquisition cost c, the consumer gathers information and the optimal contracts are close to the ones in the Stiglitz model. If c is so low that the consumer already gathers information (c < c), both insurer and consumer benefit from a policy that reduces c further. Forc > c, marginally reducing c hurts the insurer and weakly benefits the consumer.Paradoxically, a reduction in c that is "successful," meaning that the consumergathers information after the reduction but not before it, can hurt both parties.The reasons for this are that, after the reduction, (i) the cost is actually incurredand (ii) the contracts can be more distorted.
KW - Faculty of Social Sciences
KW - asymmetric information
KW - information acquisition
M3 - Working paper
T3 - University of Copenhagen. Institute of Economics. Discussion Papers (Online)
BT - Facilitating Consumer Learning in Insurance Markets --- What Are The Welfare Effects?
PB - Økonomisk institut, Københavns Universitet
CY - Kbh
ER -
ID: 85243225