CFDP 1076

Insurance Market Games: Scale Effects and Public Policy


Publication Date: August 1994

Pages: 26


We propose a game-theoretic model to study various effects of scale in an insurance market. After reviewing a simple static model, we present a one-period game in which both the buyers and sellers of insurance make strategic bids, and show that, under reasonably broad conditions, market equilibrium exists. For a special case, we then consider how both the price and quantity of insurance, as well as other quantities of interest to public policy decision makers, are affected by the number of insurance firms, the number of customers, and the total amount of capital provided by investors.


Insurance market games, Scale effects, Public policy


Published in Zeitschrift für Nationalökonomie (Journal of Economics) (June 1998), 67(2): 109-134 [DOI]