Koufopoulos, Kostas (2007) On the positive correlation property in competitive insurance markets. Journal of Mathematical Economics, Vol.43 (No.5). pp. 597-605. doi:10.1016/j.jmateco.2007.01.001 ISSN 0304-4068.

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Abstract

Most competitive models of insurance markets under asymmetric information predict a positive relationship between coverage and the accident probability. This paper derives the conditions under which this prediction holds true in a general setting involving multiple loss levels and fixed administrative costs. If there is one loss level, this prediction holds necessarily true only if all equilibrium contracts offer strictly positive coverage. With multiple loss levels, the positive relationship between coverage and the accident probability may not hold true even if all contracts offer strictly positive coverage and administrative costs are zero. These results have important implications for empirical testing. (c) 2607 Elsevier B.V. All rights reserved.

Item Type:	Journal Article
Subjects:	H Social Sciences > HC Economic History and Conditions Q Science > QA Mathematics H Social Sciences
Divisions:	Faculty of Social Sciences > Warwick Business School
Journal or Publication Title:	Journal of Mathematical Economics
Publisher:	Elsevier
ISSN:	0304-4068
Official Date:	June 2007
Dates:	Date Event June 2007 Published
Volume:	Vol.43
Number:	No.5
Number of Pages:	9
Page Range:	pp. 597-605
DOI:	10.1016/j.jmateco.2007.01.001
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access

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