Price Impact of Insurance
Fuente:
arXiv
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| Autori principali: | , |
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| Natura: | Preprint |
| Pubblicazione: |
2025
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| Soggetti: | |
| Accesso online: | |
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| _version_ | 1866915529644572672 |
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| author | Paolo, Andrea Di Giovan Higueras, Jose |
| author_facet | Paolo, Andrea Di Giovan Higueras, Jose |
| contents | This paper analyzes optimal insurance design when the insurer internalizes the effect of coverage on third-party service prices. A monopolistic insurer contracts with risk-averse agents who have sequential two-dimensional private information and preferences represented by Yaari's dual utility. Insurance contracts shape service demand and, through a market-clearing condition, determine equilibrium third-party prices. We characterize the structure of optimal contracts and show they take simple forms: either full coverage after a deductible is paid or limited coverage with an out-of-pocket maximum, closely mirroring real-world insurance plans. Technically, we formulate the problem as a sequential screening model and solve it using tools from optimal transport theory. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2503_01780 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Price Impact of Insurance Paolo, Andrea Di Giovan Higueras, Jose Theoretical Economics This paper analyzes optimal insurance design when the insurer internalizes the effect of coverage on third-party service prices. A monopolistic insurer contracts with risk-averse agents who have sequential two-dimensional private information and preferences represented by Yaari's dual utility. Insurance contracts shape service demand and, through a market-clearing condition, determine equilibrium third-party prices. We characterize the structure of optimal contracts and show they take simple forms: either full coverage after a deductible is paid or limited coverage with an out-of-pocket maximum, closely mirroring real-world insurance plans. Technically, we formulate the problem as a sequential screening model and solve it using tools from optimal transport theory. |
| title | Price Impact of Insurance |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2503.01780 |