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Linear price equilibria in a non-exclusive insurance market

Author

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  • Loss, Frédéric
  • Piaser, Gwenaël

Abstract

We consider a competitive insurance market in which agents can privately enter into multi-contractual insurance relationships and undertake hidden actions. We study the existence of a linear equilibrium when insurance companies have no restrictions on their pricing rules. For CARA utility functions, we show that a linear equilibrium always exists. For DARA utility functions, we provide sufficient conditions under which a linear equilibrium exists. We show that the linear equilibrium is unique, actuarially unfair, and induces partial insurance coverage. Lastly, we show that the linear equilibrium is always third-best efficient.

Suggested Citation

  • Loss, Frédéric & Piaser, Gwenaël, 2019. "Linear price equilibria in a non-exclusive insurance market," Journal of Mathematical Economics, Elsevier, vol. 81(C), pages 22-30.
    • Handle: RePEc:eee:mateco:v:81:y:2019:i:c:p:22-30
    DOI: 10.1016/j.jmateco.2018.12.006
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    References listed on IDEAS

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