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The consequences for a monopolistic insurance firm of evaluating risk better than customers : The adverse selection hypothesis reversed

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Date
2000
Dewey
Microéconomie
Sujet
asymmetric information; insurance markets; value of information; multidimensional signaling; informed principal
JEL code
D82; G22
Journal issue
The Geneva Risk and Insurance Review
Volume
25
Publication date
2000
Article pages
65-79
Publisher
Palgrave Macmillan
DOI
http://dx.doi.org/10.1023/A:1008749524517
URI
https://basepub.dauphine.fr/handle/123456789/5367
Collections
  • LEDa : Publications
Metadata
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Author
Villeneuve, Bertrand
Type
Article accepté pour publication ou publié
Abstract (EN)
This article models a situation in which a monopolistic insurer evaluates risk better than its customers. The resulting equilibrium allocations are compared to the consequences of the standard adverse selection hypothesis. On the positive side, they exhibit the property that low-risk people are better covered than higher-risk people. On the normative side, the article shows that there are two reasons for avoiding excessive risk classification: one is the classical destruction of insurance possibilities, and the other comes from the distrustful atmosphere generated by new asymmetric information.

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