COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1076 Insurance Market Games: Scale Effects and Public Policy Michael R. Powers, Martin Shubik, and Shun Tian Yao August 1994 We propose a game-theoretic model to study various effects of scale in an insurance
market. After reviewing a simple static model, we present a one-period game in which both
the buyers and sellers of insurance make strategic bids, and show that, under reasonably
broad conditions, market equilibrium exists. For a special case, we then consider how both
the price and quantity of insurance, as well as other quantities of interest to public
policy decision makers, are affected by the number of insurance firms, the number of
customers, and the total amount of capital provided by investors. |
