Competition between Insurance Intermediaries

Part of the Contributions to Economics book series (CE)


Asymmetric Information Reservation Price Search Cost Insurance Contract Insurance Product 
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  1. 28.
    In contrast to representative models of monopolistic competition, locational models assume that consumers have preferences for products which are close to them either spatially or with respect to certain product characteristics. See section 3.3.4 for the application of such a locational model to insurance intermediaries. For a general overview see Anderson, de Palma and Thisse (1992) and Carlton and Perloff (2005, 200–243).Google Scholar
  2. 29.
    The formal analysis follows Neumann (1994, 198–203).Google Scholar
  3. 30.
    For models that analyze the welfare implications of monopolistic competition see, for example, Dixit and Stiglitz (1977) or Hart (1985).Google Scholar
  4. 31.
    The formal analysis follows Neuberger (1998, 166–171) and Neuberger and Lehmann (1998) who used this approach to analyze direct banking as a new distribution channel for banks.Google Scholar
  5. 32.
    For a formal analysis see Neuberger and Lehmann (1998).Google Scholar
  6. 33.
    For the formal analysis see also Carlton and Perloff (2005, 452–470) and Stiglitz (1989a).Google Scholar
  7. 34.
    Gravelle (1991) takes into account direct marketing by insurance companies as well as collusion among insurers to control intermediaries’ commission.Google Scholar
  8. 35.
    This, however, requires that liability rules exist which impose on intermediaries legal liability if they violate certain duties. See Spence (1977).Google Scholar
  9. 36.
    For the working of service guarantees as signaling instruments to evaluate the quality of service firms, see Erevelles (1993); Kashyap (2001); Ostrom and Iacobucci (1998); Kumar, Kalwani and Dada (1997); Hart, Schlesinger and Maher (1992); Shimp and Bearden (1982); Wirtz, Kum and Lee (2000).Google Scholar
  10. 37.
    According to Carlton and Perloff (2005, 448) a standard is “a metric scale for evaluating the quality of a particular product”, and certification is “a report that a particular product has been found to meet or exceed a given level on a standard.”Google Scholar
  11. 38.
    While informational advertising provides information about a product’s characteristics, persuasive advertising aims to shift consumers’ tastes, see Carlton and Perloff (2005, 476–477).Google Scholar
  12. 41.
    Traditional theory explains vertical integration as resulting from market imperfections like market power, free riding, uncertainty, or economies of scale. Transaction costs economics stresses asset specificity, complexity, and uncertainty, while agency theory emphasizes information asymmetries, which are accompanied by adverse selection and moral hazard behavior. See Carlton and Perloff (2005, 395–438); Crocker (1983); Holmstrom and Milgrom (1987; 1994); Joskow (2005); Motta (2004, 302–410); Spulber (1999, 289–318); Williamson (1985; 1996).Google Scholar
  13. 46.
    See Gravelle (1992) for a comparison of the incentives set when intermediaries are compensated either by commissions or fees.Google Scholar
  14. 48.
    This avoids technical problems of the pure Hotelling model like the nonexistence of an equilibrium, see Salop (1979, 142).Google Scholar
  15. 50.
    For the optimal values for the kinked equilibrium and the necessary conditions for a zero profit equilibrium, see Salop (1979, 148).Google Scholar

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© Physica-Verlag Heidelberg 2007

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