Facilitating Consumer Learning in Insurance Markets --- What Are The Welfare Effects?

Research output: Working paper › Research

Standard

Facilitating Consumer Learning in Insurance Markets --- What Are The Welfare Effects? / Lagerlöf, Johan NM; Schottmüller, Christoph.

Kbh : Økonomisk institut, Københavns Universitet, 2013.

Research output: Working paper › Research

Harvard

Lagerlöf, JNM & Schottmüller, C 2013 'Facilitating Consumer Learning in Insurance Markets --- What Are The Welfare Effects?' Økonomisk institut, Københavns Universitet, Kbh. <https://www.econ.ku.dk/english/research/publications/wp/dp_2013/1312.pdf/>

APA

Lagerlöf, J. NM., & Schottmüller, C. (2013). Facilitating Consumer Learning in Insurance Markets --- What Are The Welfare Effects? Økonomisk institut, Københavns Universitet. University of Copenhagen. Institute of Economics. Discussion Papers (Online) Vol. 2013 No. 12 https://www.econ.ku.dk/english/research/publications/wp/dp_2013/1312.pdf/

Vancouver

Lagerlöf JNM, Schottmüller C. Facilitating Consumer Learning in Insurance Markets --- What Are The Welfare Effects? Kbh: Økonomisk institut, Københavns Universitet. 2013.

Author

Lagerlöf, Johan NM ; Schottmüller, Christoph. / Facilitating Consumer Learning in Insurance Markets --- What Are The Welfare Effects?. Kbh : Økonomisk institut, Københavns Universitet, 2013. (University of Copenhagen. Institute of Economics. Discussion Papers (Online); No. 12, Vol. 2013).

Bibtex

@techreport{6e040248096f4519b812fdd6abcbb1da,
title = "Facilitating Consumer Learning in Insurance Markets --- What Are The Welfare Effects?",
abstract = "What are the welfare effects of a policy that facilitates for insurance customers to privately and covertly learn about their accident risks? We endogenize the information structure in Stiglitz's classic monopoly insurance model. We first show that his results are robust: For a small information acquisition cost c, the consumer gathers information and the optimal contracts are close to the ones in the Stiglitz model. If c is so low that the consumer already gathers information (c < c), both insurer and consumer benefit from a policy that reduces c further. Forc > c, marginally reducing c hurts the insurer and weakly benefits the consumer.Paradoxically, a reduction in c that is {"}successful,{"} meaning that the consumergathers information after the reduction but not before it, can hurt both parties.The reasons for this are that, after the reduction, (i) the cost is actually incurredand (ii) the contracts can be more distorted.",
keywords = "Faculty of Social Sciences, asymmetric information, information acquisition",
author = "Lagerl{\"o}f, {Johan NM} and Christoph Schottm{\"u}ller",
note = "JEL codes: D82, I13",
year = "2013",
language = "English",
series = "University of Copenhagen. Institute of Economics. Discussion Papers (Online)",
number = "12",
publisher = "{\O}konomisk institut, K{\o}benhavns Universitet",
type = "WorkingPaper",
institution = "{\O}konomisk institut, K{\o}benhavns Universitet",

}

RIS

TY - UNPB

T1 - Facilitating Consumer Learning in Insurance Markets --- What Are The Welfare Effects?

AU - Lagerlöf, Johan NM

AU - Schottmüller, Christoph

N1 - JEL codes: D82, I13

PY - 2013

Y1 - 2013

N2 - What are the welfare effects of a policy that facilitates for insurance customers to privately and covertly learn about their accident risks? We endogenize the information structure in Stiglitz's classic monopoly insurance model. We first show that his results are robust: For a small information acquisition cost c, the consumer gathers information and the optimal contracts are close to the ones in the Stiglitz model. If c is so low that the consumer already gathers information (c < c), both insurer and consumer benefit from a policy that reduces c further. Forc > c, marginally reducing c hurts the insurer and weakly benefits the consumer.Paradoxically, a reduction in c that is "successful," meaning that the consumergathers information after the reduction but not before it, can hurt both parties.The reasons for this are that, after the reduction, (i) the cost is actually incurredand (ii) the contracts can be more distorted.

AB - What are the welfare effects of a policy that facilitates for insurance customers to privately and covertly learn about their accident risks? We endogenize the information structure in Stiglitz's classic monopoly insurance model. We first show that his results are robust: For a small information acquisition cost c, the consumer gathers information and the optimal contracts are close to the ones in the Stiglitz model. If c is so low that the consumer already gathers information (c < c), both insurer and consumer benefit from a policy that reduces c further. Forc > c, marginally reducing c hurts the insurer and weakly benefits the consumer.Paradoxically, a reduction in c that is "successful," meaning that the consumergathers information after the reduction but not before it, can hurt both parties.The reasons for this are that, after the reduction, (i) the cost is actually incurredand (ii) the contracts can be more distorted.

KW - Faculty of Social Sciences

KW - asymmetric information

KW - information acquisition

M3 - Working paper

T3 - University of Copenhagen. Institute of Economics. Discussion Papers (Online)

BT - Facilitating Consumer Learning in Insurance Markets --- What Are The Welfare Effects?

PB - Økonomisk institut, Københavns Universitet

CY - Kbh

ER -

ID: 85243225