Linear Prices Equilibria and Nonexclusive Insurance Market

Frédéric Loss (1, 2) , Gwanaël Piaser (3)

1 X-DEP-ECO - Département d'Économie de l'École Polytechnique
2 CNAM Paris - Centre d'enseignement Cnam Paris
3 IPAG

We consider a competitive insurance market in which agents can privately enter into multicontractual insurance relationships and undertake hidden actions. We study the existence of linear equilibria when insurance companies do not have any restriction on their pricing rules. We provide conditions under which a linear equilibrium exists. We show that two different types of linear equilibria could exist: A first one in which insurance companies make zero expected profits, and a second one in which they make strictly positive expected profits. We also analyze the welfare properties of the linear equilibria. We show that they are not always second best Pareto optimal.

Mots clés: Common Agency; Insurance; Moral Hazard; Perfect Competition; Linear Prices Equilibria

Domaines: Economies et finances

Frédéric Loss, Gwanaël Piaser. Linear Prices Equilibria and Nonexclusive Insurance Market. 2013. ⟨hal-00870113⟩