Facilitating Consumer Learning in Insurance Markets: What Are the Welfare Effects?

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningfagfællebedømt

We model a monopoly insurance market where consumers can learn their accident risks at a cost c. We then ask: What are the welfare effects of a policy that reduces c? If c is sufficiently small (c < c*), the optimal contract is such that the consumer gathers information. For c < c*, both insurer and consumer benefit from a policy that reduces c further. For c > c*, marginally reducing c hurts the insurer and weakly benefits the consumer. Finally, a reduction in c that is “successful,” meaning that the consumer gathers information after the reduction but not before it, can hurt both parties.
TidsskriftThe Scandinavian Journal of Economics
Udgave nummer2
Sider (fra-til)465-502
StatusUdgivet - 2018

ID: 172762817