Monopolistic Insurance and the Value of Information
AbstractThe value of information regarding risk class for a monopoly insurer and its customers is examined in both symmetric and asymmetric information environments. A monopolist always prefers contracting with uninformed customers as this maximizes the rent extracted under symmetric information while also avoiding the cost of adverse selection when information is held asymmetrically. Although customers are indifferent to symmetric information when they are initially uninformed, they prefer contracting with hidden knowledge rather than symmetric information since the monopoly responds to adverse selection by sharing gains from trade with high-risk customers when low risks are predominant in the insurance pool. However, utilitarian social welfare is highest when customers are uninformed, and is higher when information is symmetric rather than asymmetric. View Full-Text
Scifeed alert for new publicationsNever miss any articles matching your research from any publisher
- Get alerts for new papers matching your research
- Find out the new papers from selected authors
- Updated daily for 49'000+ journals and 6000+ publishers
- Define your Scifeed now
Snow, A. Monopolistic Insurance and the Value of Information. Risks 2015, 3, 277-289.
Snow A. Monopolistic Insurance and the Value of Information. Risks. 2015; 3(3):277-289.Chicago/Turabian Style
Snow, Arthur. 2015. "Monopolistic Insurance and the Value of Information." Risks 3, no. 3: 277-289.