An Equilibrium Analysis of the Insurance Market with Horizontal Differentiation
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Mahito Okura
This article analyzes the life and nonlife insurance markets with horizontal differentiation and brand loyalties using a spatial competition model. We construct a three-stage game that includes sales promotion in the first stage, insurance product characteristics in the second stage, and premiums in the third stage. The analysis derives the following results. First, an insurance firm with greater brand loyalty realizes a higher degree of differentiation and sets a relatively higher premium. Second, introducing regulation in insurance product characteristics leads to a lower degree of differentiation and a lower level of sales promotion. Such regulation may then be desirable in terms of social surplus.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Articles in the same Issue
- Featured Article
- A Reexamination of the Relationship between Organizational Forms and Distribution Channels in the U.S. Property Liability Insurance Industry
- An Equilibrium Analysis of the Insurance Market with Horizontal Differentiation
- On Modeling Diversification Benefits in Insurance Portfolios--An Australian Perspective
- Asymptotic Tail Probability of Randomly Weighted Sum of Dependent Heavy-Tailed Random Variables
- Survival Mixture Model for Credit Risk Analysis
- A Simple Metric for Gauging Risk Aversion
Articles in the same Issue
- Featured Article
- A Reexamination of the Relationship between Organizational Forms and Distribution Channels in the U.S. Property Liability Insurance Industry
- An Equilibrium Analysis of the Insurance Market with Horizontal Differentiation
- On Modeling Diversification Benefits in Insurance Portfolios--An Australian Perspective
- Asymptotic Tail Probability of Randomly Weighted Sum of Dependent Heavy-Tailed Random Variables
- Survival Mixture Model for Credit Risk Analysis
- A Simple Metric for Gauging Risk Aversion
