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Market Power In The Property/Casualty Insurance Industry

Author

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  • Arthur M. B. Hogan
  • Robert C. Witt

Abstract

Pro‐consumer groups have charged that insurance firms are able to exercise market power to reduce coverage and/or increase rates. The ability of firms to earn economic rents (abnormal profits) is a factor in banks' interest in entering insurance markets. In classical economics such collusion is usually only possible with cartels. Recent work, examining the relationship between industry structure indicates that the power that can be exercised by cartels may be more limited than under the classical paradigms. We examine the ability of insurers to exercise market power in light of these modern theories.

Suggested Citation

  • Arthur M. B. Hogan & Robert C. Witt, 1998. "Market Power In The Property/Casualty Insurance Industry," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 2(1), pages 76-84, July.
    • Handle: RePEc:bla:rmgtin:v:2:y:1998:i:1:p:76-84
    DOI: j.1540-6296.1998.tb00084.x
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    References listed on IDEAS

    as
    1. D'Arcy, Stephen P & Doherty, Neil A, 1990. "Adverse Selection, Private Information, and Lowballing in Insurance Markets," The Journal of Business, University of Chicago Press, vol. 63(2), pages 145-164, April.
    2. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
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