The theory of information asymmetry has explained the coexistence of stock and mutual companies in the insurance market. However, there is discrepancy between the theory and empirical findings. This paper proposes a simple theory to fill the gap between the theory and empirical findings. Our...

This paper investigates adverse selection in crop insurance markets using both parametric and nonparametric methods. Our results reject the conditional independence of the choice of insurance contracts and risk of loss, implying the presence of informational asymmetries between insurers and...

This paper empirically examines the adverse selection models by using the data from China’s personal automobile insurance market through the standard positive-correlation test. Results show that higher-risk insurance policyholders do tend to buy insurance with a lower coinsurance rate, which...

This paper characterizes the equilibrium sets of common agency games with direct externalities between principals when they compete with nonlinear prices. Direct externalities arise when the contracting variable of one principal directly affects the other principal's payoff. First, we...

Stiglitz (1977) established three well-known features of monopoly insurance markets subject to adverse selection: (i) at least one market segment is served, despite the informational asymmetry; (ii) there is always some screening of risk classes; and (iii) efficiency is sacrificed to achieve...

In an ongoing organization, such as a large law partnership firm, employees are motivated not only by current rewards but also by the prospect of promotion, and the opportunity to make the rules in the future. This leads to a recursive contract design problem in an overlapping generations...

We used claims data from a large U.S. employer that introduced changes in its medical and drug coverage offerings in 2002 for non-Medicare eligible retirees. In addition to the existing plans, the employer introduced two new plans in 2002 that were less generous both in terms of medical and drug...

In the presence of scarce shelf space, retail grocers face the proliferation of new products and high failure rates. Accurately predicting the demand for a new product becomes increasingly difficult for retailers as the number of product offerings increases. This study explores slotting...

Summary This article reviews the basic theoretical model of risk adjustment (Glazer/McGuire 2000) with a special focus on a coherent presentation of the main results. With adverse selection a regulator pursuing efficiency and solidarity objectives will need a risk adjustment scheme acting on a...

Summary The center of the article deals with the future of the public and private health insurance system in Germany. It analyses therefore both the statutory fund system and the private health insurers. Particular emphasis is put on the Social Health Insurance Competition Strengthening Act 2007...