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Raising Capital in an Insurance Oligopoly Market

Author

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  • Julien Hardelin

    (Département d’Économie, École Polytechnique, 91128 Palaiseau Cedex, France and AgroParisTech ENGREF, 19 avenue du Maine, 75732 Paris Cedex 15, France)

  • Sabine Lemoyne de Forges

    (Département d’Économie, École Polytechnique, 91128 Palaiseau Cedex, France and AgroParisTech ENGREF, 19 avenue du Maine, 75732 Paris Cedex 15, France)

Abstract

We consider an oligopoly market where firms offer insurance coverage against a risk characterised by aggregate uncertainty. Firms behave as if they were risk averse for a standard reason of costly external finance. The model consists in a two-stage game where firms choose their internal capital level at stage one and compete on price at stage two. We characterise the subgame perfect Nash equilibria of this game and focus attention on the strategic impact of insurers capital choice. We discuss the model with regard to the insurance industry specificities and regulation.

Suggested Citation

  • Julien Hardelin & Sabine Lemoyne de Forges, 2012. "Raising Capital in an Insurance Oligopoly Market," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 37(1), pages 83-108, March.
    • Handle: RePEc:pal:genrir:v:37:y:2012:i:1:p:83-108
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    References listed on IDEAS

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    Cited by:

    1. Sabine Lemoyne de Forges & Ruben Bibas & Stéphane Hallegatte, 2001. "A dynamic model of extreme risk coverage : Resilience and e fficiency in the global reinsurance market," CIRED Working Papers halshs-00800460, HAL.
    2. Sebastian Schlütter, 2019. "Optimal taxation in non-life insurance markets," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 44(1), pages 1-26, March.
    3. Sebastian Schlütter, 2019. "Optimal taxation in non-life insurance markets," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 44(1), pages 1-26, March.
    4. Dutang, Christophe & Albrecher, Hansjoerg & Loisel, Stéphane, 2013. "Competition among non-life insurers under solvency constraints: A game-theoretic approach," European Journal of Operational Research, Elsevier, vol. 231(3), pages 702-711.
    5. Radoslav Raykov, 2014. "Uncertain Costs and Vertical Differentiation in an Insurance Duopoly," Staff Working Papers 14-14, Bank of Canada.
    6. repec:hal:wpaper:hal-00746245 is not listed on IDEAS
    7. Jean-François Outreville, 2014. "The Meaning of Risk? Insights from The Geneva Risk and Insurance Review," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 39(4), pages 768-781, October.

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