IDEAS home Printed from https://ideas.repec.org/a/rje/randje/v17y1986iwinterp606-617.html
   My bibliography  Save this article

Cost Function Estimation and Quality Bias: The Regulated Automobile Insurance Industry

Author

Listed:
  • Ronald R. Braeutigam
  • Mark V. Pauly

Abstract

This article explores the implications of endogenous product quality (and therefore endogenous output) in the empirical estimation of cost functions for regulated automobile collision insurance firms. It contains a structural model of such a firm and provides an illustration of the types of biases that can result if data on quality of service are unavailable or otherwise omitted. The analysis shows how the directions of biases depend on the nature of the variations in the observed (nonquality) data. A new test suggests that such bias is present in insurance cost functions.

Suggested Citation

  • Ronald R. Braeutigam & Mark V. Pauly, 1986. "Cost Function Estimation and Quality Bias: The Regulated Automobile Insurance Industry," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 606-617, Winter.
    • Handle: RePEc:rje:randje:v:17:y:1986:i:winter:p:606-617
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0741-6261%28198624%2917%3A4%3C606%3ACFEAQB%3E2.0.CO%3B2-4&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nils Gutacker & Chris Bojke & Silvio Daidone & Nancy J. Devlin & David Parkin & Andrew Street, 2013. "Truly Inefficient Or Providing Better Quality Of Care? Analysing The Relationship Between Risk‐Adjusted Hospital Costs And Patients' Health Outcomes," Health Economics, John Wiley & Sons, Ltd., vol. 22(8), pages 931-947, August.
    2. Laura Di Giorgio & Massimo Filippini & Giuliano Masiero, 2014. "The relationship between costs and quality in nonprofit nursing homes," IdEP Economic Papers 1402, USI Università della Svizzera italiana.
    3. François Destandau & Serge Garcia, 2014. "Service quality, scale economies and ownership: an econometric analysis of water supply costs," Journal of Regulatory Economics, Springer, vol. 46(2), pages 152-182, October.
    4. Georges Dionne & Robert Gagné, 1996. "Progrès technique et croissance de la productivité : estimations sur un panel incomplet de firmes ayant des qualités de production différentes," Économie et Prévision, Programme National Persée, vol. 126(5), pages 63-76.
    5. Berger, Allen N & Cummins, J David & Weiss, Mary A, 1997. "The Coexistence of Multiple Distribution Systems for Financial Services: The Case of Property-Liability Insurance," The Journal of Business, University of Chicago Press, vol. 70(4), pages 515-546, October.
    6. Zhong, Zhen & Chen, Shufen & Kong, Xiangzhi & Tracy, Megan, 2014. "Why improving agrifood quality is difficult in China: Evidence from dairy industry," China Economic Review, Elsevier, vol. 31(C), pages 74-83.
    7. Pääkkönen, Jenni & Seppälä, Timo, 2012. "Dimensions of health care system quality in Finland," Working Papers 31, VATT Institute for Economic Research.
    8. Hélène Bouscasse & François Destandau & Serge S. Garcia, 2006. "Analyse économétrique des coûts des services d'eau potable et qualité des prestations offertes aux usagers," Post-Print hal-01072367, HAL.
    9. I. Krinsky & W. Rotenberg, 1989. "The valuation of initial public offerings," Contemporary Accounting Research, John Wiley & Sons, vol. 5(2), pages 501-515, March.
    10. Antle, John M., 1998. "No Such Thing as a Free Safe Lunch: The Cost of Food Safety Regulation in the Meat Industry," Research Discussion Papers 256822, Montana State University, Department of Agricultural Economics and Economics, Trade Research Center.
    11. Ollinger, Michael & Guthrie, Joanne, 2015. "Economies of Scale, the Lunch-Breakfast Ratio, and the Cost of USDA School Breakfasts and Lunches," Economic Research Report 212480, United States Department of Agriculture, Economic Research Service.
    12. Bulut, Harun, 2016. "Economic Design for the Supply Side of Agricultural Insurance Markets," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236008, Agricultural and Applied Economics Association.
    13. Paul J. Gertler & Donald M. Waldman, 1990. "Quality Adjusted Cost Functions," NBER Working Papers 3567, National Bureau of Economic Research, Inc.
    14. Kathleen Carey & Theodore Stefos, 2011. "Controlling for quality in the hospital cost function," Health Care Management Science, Springer, vol. 14(2), pages 125-134, June.
    15. Jeffrey I. Bernstein, 1992. "Information Spillovers, Margins, Scale and Scope: With an Application to Canadian Life Insurance," NBER Working Papers 3979, National Bureau of Economic Research, Inc.
    16. Wholey, Douglas & Feldman, Roger & Christianson, Jon B. & Engberg, John, 1996. "Scale and scope economies among health maintenance organizations," Journal of Health Economics, Elsevier, vol. 15(6), pages 657-684, December.
    17. I Gede Mahatma Yuda Bakti & Sik Sumaedi & Tri Rakhmawati & Sih Damayanti & Medi Yarmen, 2020. "The Model of Domestic Product Quality Syndrome," SAGE Open, , vol. 10(4), pages 21582440209, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:17:y:1986:i:winter:p:606-617. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.rje.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.